Jefferies has maintained its ‘Underperform’ rating on Dixon Technologies, with a target price of ₹12,600, indicating a potential downside of 28% from the current market price (CMP) of ₹17,520.50. Despite a strong Q3FY25 performance, the brokerage has flagged concerns over segmental risks and valuation stretch.
Key Highlights:
- Q3FY25 Performance:
- Consolidated sales grew by 117% YoY to ₹4,597 crore, while PAT surged 123% YoY to ₹110 crore.
- Operating profit margin (OPM) stood at 3.7%, marginally lower by 10bps YoY but flat sequentially.
- Mobile & EMS Segment Dominance:
- The Mobile and EMS segment now contributes 89% of sales, up from 67% in Q3FY24.
- Segmental sales tripled YoY due to new customer additions and ramp-up of orders, with segmental OPM improving by 30bps YoY to 3.5%.
- Jefferies raised a red flag over the Mobile PLI tenure, which is set to expire in CY26, posing risks to long-term growth.
- Consumer Electronics Decline:
- Sales in the Consumer Electronics segment dropped by 32% YoY, reflecting challenges in non-EMS segments.
- Valuation Concerns:
- Jefferies noted that the stock trades at 107x FY26 estimated PE, which it considers stretched, especially given the risks associated with segmental concentration and expiration of PLI benefits.
Outlook:
Jefferies remains cautious about Dixon’s reliance on the Mobile and EMS segment, highlighting potential risks from the PLI expiration and the sharp decline in Consumer Electronics sales. While the company’s Q3 results were robust, the current risk-reward ratio appears unfavorable.
CMP and Target:
- Current Market Price (CMP): ₹17,520.50
- Target Price (TP): ₹12,600
- Downside Potential: 28%
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult their financial advisors before making any investment decisions.