Dixon Tech stock gains 2% despite weaker-than-expected Q4; Goldman Sachs sees 27% potential downside

Dixon Technologies shares after a muted opening in Thursday’s session gained nearly 2 per cent at day’s high to Rs 8253 after the company reported its Q4FY24 earnings post market hours on the previous day. The consumer electronics major for the reporting quarter posted weaker-than-expected results with consolidated profit coming in at Rs 97 crore as against estimates of Rs 106 crore. On a year-on-year (YoY) basis, the electronics manufacturing services company logged 20 per cent growth in PAT.

Revenue from operations during the period stood at Rs 4,675 crore, a healthy increase of 52 per cent on-year. Ebitda or earnings before interest, taxes, depreciation and amortisation also gained 26 per cent in comparison to the same period last year to Rs 199 crore. EBITDA margin has been recorded at 4.3 per cent, a decline of 90 bps in comparison to 5.2 per cent logged in the same period last year.

Net debt at the company in FY24 has reduced to Rs 54 crores as against Rs 77 crores in the preceding fiscal year.

The revenue contribution from the company’s mobile and EMS division was at 66 per cent during the March-ended quarter, while from the consumer electronics and appliances segment it is at 19 per cent.

Here’s what global brokerages suggest for Dixon Tech post its Q4 show:

Goldman Sachs, maintaining a bearish view, has recommended a ‘Sell’ view on the counter with the target raised to Rs 5,910 from the earlier Rs 5,310. The suggested target implies a potential downside of 27 per cent. The brokerage said that the company’s Q4 EBITDA which is up 17 per cent on-year and flat sequentially is below its estimates. Furthermore, the ramp-up in the mobile division has not begun fully in Q4, & even lighting & consumer electronics came in weaker. From here, the market will keenly watch the ramp-up in all segments, particularly mobiles, it added.

On similar lines, Jefferies continues with ‘Underperform’ view on the counter with the target raised to Rs 6350 from Rs 5920. The Q4 results came in line with the brokerage’s estimates. 
Mobile segment drove sales yet again, and barring it, most other product segments were muted in FY24. 

Conversely, CLSA maintains an “Accumulate” view on Dixon with the target raised to Rs 9000 from the previous Rs 7,070. The brokerage estimates that the company’s EPS to more than treble in next three years helped by a 40 per cent+ revenue CAGR, given the strong mobile segment ramp-up. Smartphone shipments (ex Samsung) are guided at 28-30m units in FY25 vs 6.5m units in FY24 by the brokerage.