Dixon Technologies - Opulently Valued; Downgrade To Reduce: HDFC Securities

HDFC Securities Institutional Equities

Being a key beneficiary of the government’s most successful Production Linked Incentive scheme, the Dixon Technologies India Ltd. stock price has nearly doubled over the past six months, led by accelerated growth momentum seen in the mobile segment (our estimate: ~22 times over FY20). Staying true to their DNA, Dixon’s mobile capacity (45 million smartphones/40 million feature phones) can cater to 50% of the opportunity pool.

Moreover, their agreement with HKC Corporation to manufacture display modules will further deepen value addition (~10% of BoM), ensuring customer stickiness. Having acquired the controlling stake in Ismartu (brands like Itel, Infinix, Tecno) along with the partnership with Longcheer (BBK Group brands – Realme, Oppo, Vivo, etc.), Dixon now caters to almost all the top six brands within the country.

The ramp-up of volumes with existing customers and new customer additions will help sustain the momentum in the mobile division, which is likely to contribute 75%+ of Dixon’s incremental revenue over FY24- 27, in our view.

Although we continue to appreciate Dixon’s execution capabilities, the valuation has turned rich (75 times FY26 EPS) after the recent surge in the stock price, limiting potential upside. Hence, we downgrade Dixon to Reduce (from Add) with a target price of Rs 11,000, based on 60 times June 2026 earnings per share.

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