Shares of Dixon Technologies fell as much as 20% on the BSE in the early trading session on Friday, hitting a 52-week low. 2,691 after reporting a disappointing set of earnings for the third quarter ending December 2022 and reducing its revenue guidance.
,Dixon TechQ3FY23 earnings and management commentary disappointed our/Street expectations – revenue was down 22% even though Q3FY23 PAT was up 10% due to margin expansion. Dixon also slashed its revenue guidance, which could hurt the stock in the near term. However, margin expansion appears to be structural, and hence profit decline should be modest,” Edelweiss said.
Dixon is banking on adding two new clients to the mobile division – closer to signing in Q4FY23. This will be a key factor if mobile revenue is to be doubled 80 bn) in FY24E. We have cut FY23E/24E estimates, but growth looks healthy despite these cuts (with 30%+ RoE). Hence, the brokerage house has maintained its ‘Buy’ rating with a revised target price of Rs. 3,865 per share, even though it expects near-term weakness for the stock as earnings play out through the decline.
Another brokerage MK believes that the slowdown in some key sectors is hampering the overall growth of the brands, with the added impact of Dixon being a B2B supplier.
“Over the past year, Street has cut FY23 EPS by over 30% due to lower sales. We have cut our FY23e-FY25e EPS by 16-20% due to lower sales, while margins remain at ~4%. We maintain hold on the stock, with a December 2023 target price of Rs 35x based on PE. 3,165/share. The sales ramp-up is the key watchdog going forward in our view. The risks include recession, which reduces the need for brands,” said MK.
Meanwhile, brokerage Yes Securities has rated the stock as Neutral (TP: 3,506) as the stock has already fallen sharply and is expected to resume strong growth momentum as order book remains healthy across categories; The new capabilities have begun commercial production; New product categories such as wearables and refrigerators will drive revenue growth; The new joint venture in wearables and telecom products will add further growth levers.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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