Dixon Technologies has been in the spotlight recently, thanks to its well quarterly earnings. Despite impressive Q3 results, the company's stock experienced an unexpected decline, causing investors to question whether it's a temporary setback or a larger trend.
Here’s a deep dive into what happened and why it might still be a good time to invest in stocks like Dixon Technologies.
Q3 financial highlights: A strong performance
Dixon Technologies posted a consolidated net profit of ₹171.19 crore for the third quarter of FY25, marking a remarkable 77.5% year-on-year (YoY) growth. Revenue from operations surged to ₹10,453.68 crore, reflecting a YoY rise of 117%. However, sequentially, the net profit and revenue saw declines of 56% and 9.4%, respectively.
The company’s EBITDA increased by 113% YoY to ₹398 crore, underlining Dixon’s operational strength. Yet, margins stood at 3.7%, slightly below last year’s 3.8%, primarily due to a higher contribution from the mobile manufacturing segment. While these figures are impressive, they failed to align fully with market expectations, leading to profit booking and a dip in share price.
Stock market reaction: Profit booking takes centre stage
Despite closing higher at ₹17,554.45 per share on the day of the results. Dixon’s stock witnessed a sharp decline in the subsequent trading session, dropping by 8.5% to ₹13,708.35. This sell-off followed profit booking after the stock reached an all-time high of ₹15,999.95, creating a bearish sentiment in the market.
Market analysts suggest that while the Q3 results were commendable, the limited potential for immediate gains led some investors to offload their holdings. For those planning to invest in stocks, this dip might present an opportunity to acquire Dixon shares at a relatively lower valuation.
Segment analysis: Mobile manufacturing leads the charge
The mobile business emerged as Dixon’s growth driver, contributing 89% to the overall topline compared to 67% in the base quarter. Revenue from this segment nearly tripled YoY to ₹9,305 crore, with EBIT rising to ₹322 crore.
On the flip side, revenue from the Consumer Electronics & Appliances division saw a significant decline of 32% YoY and over 50% from the September quarter. It contributed just 6% to the topline this quarter. Similarly, the Home Appliances and Lighting Products divisions experienced sequential declines of 29% and 14%, respectively, despite modest YoY growth.
Brokerage views: Mixed sentiments on valuations
Analysts have mixed opinions regarding Dixon Technologies' valuations. While some acknowledge the company’s impressive mobile segment performance and have adjusted earnings projections upwards, they still advise caution, citing limited growth potential in the short term.
These analysts have set a target price of ₹16,100. On the other hand, other experts maintain an optimistic view of Dixon's long-term growth. They project a strong annual growth rate (CAGR) in revenue and net profit from FY24 to FY27. This positive outlook is based on new product developments and enhanced operational efficiencies, with a higher target price of ₹17,500.
Why the drop might be an opportunity
The recent decline in Dixon Technologies’ stock price may not reflect the company’s long-term potential. With strong fundamentals, a growing mobile manufacturing business, and ambitious expansion plans, Dixon continues to position itself as a leader in India’s electronics manufacturing sector.
For investors looking to diversify their portfolio and invest in stocks with strong growth potential, Dixon offers a compelling case. Its consistent performance, coupled with favourable industry dynamics, makes it a stock worth considering for long-term gains.
Should you invest in Dixon Technologies?
As of January 21, 2025, its stock is trading at ₹15164.10, reflecting a 13.64% decrease by 11:38 AM. While the recent dip in Dixon Technologies’ share price may have raised concerns, it could also be viewed as a buying opportunity for savvy investors. The company’s solid Q3 performance and positive growth outlook underscore its potential to deliver strong returns in the future.
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