Shares of Dixon Technologies crashed up to 20% on the BSE in Friday’s early trading session, hitting a 52-week low of ₹2,691 apiece after reporting a disappointing set of earnings for the third quarter ended December 2022 and also slashing its revenue guidance.
“Dixon Tech’s Q3FY23 earnings and management commentary disappointed our/Street’s expectations – revenue was down 22% YoY, even as Q3FY23 PAT was up 10% YoY due to margin expansion. Dixon has also slashed its revenue guidance, which may hurt the stock in the near-term. However, margin expansion seems structural, and hence profit downgrades should be lower,” said Edelweiss.
Dixon is banking on adding two new clients in the mobile division – close to signing in Q4FY23. This will be a key factor if mobile revenues are to double (to ₹80 bn) in FY24E. We cut FY23E/24E estimates, but growth seems healthy despite these cuts (with 30%+ RoE). Hence, the brokerage house has retained its ‘BUY’ rating with a revised target price of ₹3,865 per share, even as it expects near-term weakness for the stock as earnings downgrades play through.
Another brokerage Emkay believes slowdown in some key segments is hampering overall growth of brands, with additional impact from Dixon being a B2B supplier.
“In the last one year, the Street has cut FY23 EPS by over 30% owing to lower sales. We have cut our FY23e-FY25e EPS by 16-20% largely on account of lower sales, while margin remains at ~4%. We maintain HOLD on the stock, with December 2023 target price of Rs3,165/share based on 35x PE. Sales ramp-up remains the key monitorable going forward, in our view. Risks include slowdown leading to lower demand by brands,” Emkay said.
Meanwhile, brokerage Yes Securities has upgraded the stock to Neutral (TP: ₹ ₹3,506) as stock has already corrected sharply and strong growth momentum is expected to resume as order book across the categories continues to remain healthy; new capacities have started commercial production; revenues from new product categories like wearables and refrigerators will drive incremental growth; new JV in, Wearables and Telecom products will add further growth levers.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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