Nevertheless, as buyers began getting fearful in regards to the inventory’s costly valuation amid rising inflation affecting client spending, share costs of the Noida-based firm that manufactures electronics like TV and cellphones additionally took successful.
Since then, Dixon inventory is down 46 per cent from its all-time excessive. Given the robust policy-related tailwinds (PLI scheme), long-term potential of outsourced manufacturing in India and rising demand for client electronics, analysts have, nonetheless, been largely optimistic.
Out of the 19 analysts with protection on Dixon, the consensus advice is a Purchase with a mean goal value of Rs 4,418 that alerts upside potential of round 31 per cent, based on Trendlyne knowledge.
International brokerage Morgan Stanley, which not too long ago downgraded the inventory to underweight, mentioned the market is ignoring a number of dangers together with competitors, margins, and ROE contraction.
“Past the PLI interval (i.e., as soon as the inducement scheme is discontinued), the associated fee competitiveness of EMS gamers will probably be examined, and ample native part ecosystem growth will play an vital a part of a sustained manufacturing thrust within the nation. Rising commodity costs pose a threat to ODM enterprise margins,” it mentioned in a be aware to purchasers.
Morgan Stanley has a goal value of Rs 2,634 on Dixon, signalling a draw back potential of as a lot as 28 per cent.
Amid the bearish outlook on progress and impression on margins because of inflationary headwinds, one of many causes behind the underperformance of the digital manufacturing companies (EMS) participant has been sell-off by FIIs.
Market knowledge exhibits that overseas buyers have decreased holdings in Dixon from 18.51 per cent to 16.39 per cent within the March quarter.
Dixon can also be a favorite of retail buyers, who held 15.23 per cent stake within the firm as mirrored by the variety of particular person shareholders with investments beneath Rs 2 lakh.
Home brokerage agency ICICI Securities cites three key triggers for the inventory:
1) Dixon has a market share of 3-4 per cent within the Indian EMS trade which is valued at $23.5 billion. ICICI Sec mentioned there is a chance to develop and develop.
2) The home cellular manufacturing is about to develop 5x to Rs 10.5 lakh crore by FY26 underneath the PLI scheme. Dixon is seen as one of many predominant beneficiaries.
3) New segments reminiscent of electronics/IT merchandise, telecom merchandise and LED lights & AC parts will drive future income progress for Dixon, based on the brokerage.
(Disclaimer: Suggestions, options, views and opinions given by the consultants are their very own. These don’t symbolize the views of Financial Occasions)