Nomura thumbs up Dixon as co starts making Google Pixel; stock hits record

Brokerages positive on stock; company expected to emerge as major player in India's smartphone manufacturing by FY27

The stock of electronics manufacturing services (EMS) major Dixon Technologies hit its all-time high at Rs 16,840.25 a share on Monday. The country’s largest EMS player was the highest gainer in the BSE 200 index, closing the day with gains of 6 per cent at Rs 16,759. 

 

The stock surged after the company announced that its wholly-owned subsidiary Padget Electronics, in partnership with Compal, has commenced mass production of Google Pixel smartphones for Google's Indian arm, Google Information Services India.

 

Commenting on the Google partnership, Siddhartha Bera and Kapil Singh of Nomura Research believe that while volumes are low, realisations are significantly better at Rs 25,000–26,000 per unit for Pixel production than its current average realisation of Rs 9,000 per unit. 

 

 

Assuming a 60 per cent share of the business, this could potentially add around Rs 1,500 crore in revenues, representing about 4 per cent of FY26 smartphone sales. However, analysts highlighted that the production ramp-up was likely to be gradual.

 

Moreover, the larger opportunity lies in addressing export demand for the Pixel. In 2023, Google sold around 10 million Pixel units globally, with production concentrated in China and a smaller share in Vietnam (15 per cent).

 

Amid the ongoing US-China trade tensions and the success of Apple's manufacturing shift to India, analysts believe, Google could potentially relocate around 30 per cent of its Pixel production to India. Such a move could translate to Rs 9,000–10,000 crore in sourcing from India. 

 

Looking ahead, analysts at Nomura expect Dixon Technologies to emerge as a major player in India’s smartphone manufacturing, producing over 47 million units by FY27, and accounting for more than 30 per cent of domestic demand. The growth is expected to drive smartphone revenues to Rs 41,200 crore by FY27, implying a 28 per cent compound annual growth rate (CAGR) over FY25-27 and contributing 66 per cent to the company’s overall revenues.

 

Hence, analysts at Nomura remain bullish on Dixon, maintaining a ‘buy’ rating with a target price of Rs 18,654.

 

Motilal Oswal Research expects Dixon to deliver an annual growth of 16 per cent in consolidated revenues beyond FY27 (Production Linked Incentive scheme ends in FY26). It will be driven by incremental client additions in mobile through a tie-up with China’s Longcheer, the scope of improving wallet share with existing clients to up to 30-40 per cent, shifting toward premium mobiles such as Compal, and potential export opportunities as Dixon would achieve a scale of nearly Rs 45,000 crore in mobile by FY27. The brokerage has a ‘buy’ rating with a target price of Rs 17,500 a share. 

 

Among the key positives for Nirmal Bang Research is the consistent increase in wallet share with existing mobile customers, adding new customers, and expanding export footprint in the mobile category. In addition, the company is bagging manufacturing contracts for four of the five major IT hardware brands in India. It is foraying into the component manufacturing ecosystem, especially in the high-margin business of industrial and automotive electronics.

 

Natasha Jain of the brokerage remains positive on the long-term outlook and believes that such developments will help in operating margin expansion over the medium to long term.

 

While backward integration may stretch the working capital cycle and return ratios, free cash flow generation is not expected to be a challenge, given the high asset turns on mobile assembly and IT hardware business.  

Though the brokerage is structurally positive on Dixon’s long-term business prospects, it has maintained a ‘hold’ rating with a revised target price of Rs 16,450, given that the stock has run up 140 per cent year to date in 2024.