Stock of this EMS player hit 52-week high today; stock up 41% in 6 months

Shares of Dixon Technologies sprinted 9.5 per cent and hit a fresh 52-week high of Rs 6,034.75 apiece on the BSE in Friday's intraday session supported by volume uptick.

At 1:40 PM, shares of the electronic manufacturing services (EMS) provider was trading 9 per cent higher at Rs 6,005 per share as against 0.76 per cent gain in the benchmark S&P BSE Sensex. A combined 1.68 million shares have so far changed hands on the BSE and NSE.

Over the past one month, shares of Dixon Tech have advanced 6 per cent on the BSE as against over 5 per cent rally in the Sensex. In six months, the shares have surged 41 per cent compared to the Sensex's 8 per cent rally.

On November 30,  Padget Electronics Private Limited, a wholly-owned subsidiary of Dixon Technologies (India) Limited, inaugurated a new smartphone manufacturing plant at Noida, Uttar

Pradesh.

The latest manufacturing facility by Padget Electronics has commenced the production of smartphones for global technology giant - Xiaomi India in Q3, 2023. The said state of art manufacturing facility at Noida is built across 2.7 lac square feet and at an annual capacity of 25 million units. 

"This is a significant step forward in our journey of boosting the local smartphone manufacturing ecosystem in India and building a strong, world-class technology ecosystem. We have a 5-year long association with Xiaomi India, and are excited to start this new chapter that exemplifies synergy between our two organisations," said Atul Lall, vice chairman and managing director, Dixon Technologies.

Dixon Technologies (India) Limited is a home grown design-focused and solutions company, engaged in manufacturing products in the consumer durables, lighting and mobile phones markets in India. 

Their product portfolio includes consumer electronics like LED TVs; home appliances like washing machines;)lighting products like LED bulbs and tubelights, downlighters; mobile phones; CCTV & DVRs; medical equipment; and wearables. 

Padget Electronics Private Limited, meanwhile, is engaged in the business of manufacturing of mobile phones and IT hardware.

On November 29,  rating agency Icra Limited re-affirmed its ratings, and revised the outlook on the long term rating from 'Stable' to 'Positive'.

"The revision in outlook to Positive reflects Icra's expectation of a sustained improvement in Dixon Technologies (India) credit profile going forward, led by enhanced operating performance across its business segments in the backdrop of healthy growth in order inflow and customer diversification in the last 12-18 months. In addition, continued focus on backward integration and increase in Original Design Manufacturing (ODM) business are expected to support its profitability indicators and leverage metrics over the medium term," the agency said in its rating rationale.

The ratings continue to derive comfort from the Dixon Group's (viz. the company and its subsidiaries/joint ventures or JVs) strong operating profile, characterised by an established track record as an electronic manufacturing services (EMS) player with presence in diversified product segments, leading position in its key product segments (like LED television, lighting, mobiles, washing machines, etc.), and well-established relationships with a reputed clientele.

EMS growth visibility has been strengthening as most countries are looking to diversify from China post Covid. India, too, is better positioned with demographical advantages being one of low cost making and vast working age population with better education literacy levels and proactive policy’s (PLI), and incentives by the Government of India to boost foreign investment in India as alternative manufacturer to China. 

Dixon, on its part, is anticipating strong growth across categories in FY24 on the back of ramp up in mobile business with addition of two new customers ITEL and Xiaomi, coupled with addition new global customers; healthy order book in consumer electronics and improvement in open cell prices; ramp up in FATL washing machine volumes; and ramp up in wearables and hearables. 

"The mobile segment should continue to materially scale up led by incremental volumes from new customers/products. Dixon also continues to focus on new product launches in the lighting segment to revive its growth. Meanwhile, Dixon also remains a strong candidate for being selected in the IT Hardware PLI 2.0 scheme for manufacturing of laptops, tablets etc. We estimate a robust 53 per cent earnings per share (EPS) CAGR over FY23-26E with robust return ratios (ROE of 30-33 per cent) led by efficient capital/NWC management," wrote analysts at JM Financial in a recent report.

In the September quarter, Dixon's net sales were up 28 per cent year-on-year to Rs 4,940 crore. Mobile phones & EMS segment (up 76.8 per cent Y-o-Y) drove the revenue growth led by improved order book from Motorola, volume addition from itel (feature phones), and continued uptick in hearables & wearables (for boAT).

Security systems grew 17.7 per cent Y-o-Y while Home appliances revenue was flat (up 0.3 per cent Y-o-Y), and other segments were weak (Lighting products; dowm 38 per cent, Consumer electronics; down 4 per cent).

Ebitda increased 37 per cent Y-o-Y to Rs 200 crore given strong growth in revenues and Ebitda margin expansion of 30bps Y-o-Y.