Explained: Why Dixon Technologies share price tumbled over 9% after early rally

The company's stock reached a peak of Rs 15,999.95, rising by 6.21% after releasing impressive Q2 earnings on Friday.

In Short

• Q2 revenue surged 133% YoY to Rs 11,534 crore
• Nuvama sees limited stock gains, retains 'hold'
• Dixon's net profit rose 265% in Q2 FY25

Shares of Dixon Technologies experienced a sharp fall despite hitting a record high recently. The company’s stock reached a peak of Rs 15,999.95, rising by 6.21% after releasing impressive Q2 earnings on Friday. However, profit booking soon followed, and the stock dropped by 13.33% to Rs 13,055.30 from the previous closing price of Rs 15,064.05 on the Bombay Stock Exchange (BSE).

This represents an 18.40% drop from its record high. During the trading session, Dixon saw a high turnover, with shares worth Rs 176.33 crore changing hands. The market capitalisation of the company currently stands at Rs 84,653 crore.

As of 12:35 PM, the shares were trading 9% lower at Rs 13,708.35.

Brokerage firm Nuvama noted that there is limited potential for further gains in Dixon's stock despite the strong Q2 performance.

"Dixon delivered an outstanding Q2 for the fiscal year 2025, with revenue surging 133% year-on-year (YoY) to Rs 11,534 crore, which was 29% above our estimate. This increase was primarily due to a 235% YoY rise in the mobile segment," Nuvama said. The brokerage highlighted that Dixon's earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose by 113% YoY to Rs 426 crore, exceeding estimates by 22%. However, margins were affected by a larger share of mobile production, standing at 3.7%. The company's profit after tax (PAT) jumped 261% YoY to Rs 412 crore, boosted by investment gains, with adjusted PAT growing 123% YoY to Rs 255 crore, 20% above estimates.

Nuvama has adjusted its earnings per share (EPS) projections for the fiscal years 2025 to 2027, raising them by up to 23% due to Dixon’s solid Q2 performance and favourable growth outlook. They now value Dixon at 65 times its December 2026 EPS, leading to a target price of Rs 16,100. However, they have retained a 'HOLD' recommendation, citing limited upside potential.

Another brokerage, Motilal Oswal, continues to have a positive outlook on Dixon Technologies, reiterating a 'Buy' recommendation with a higher target price of Rs 17,500.

"Dixon Technology’s results for Q2 surpassed expectations, mainly due to strong showings in the mobile and electronics manufacturing services (EMS) segments, as well as the mid-August integration of Ismartu," the firm reported. Motilal Oswal is optimistic about Dixon’s revenue and profitability in the coming years, predicting a compound annual growth rate (CAGR) of 48% in revenue, 49% in EBITDA, and 56% in PAT between FY24 and FY27.

The brokerage attributes this anticipated growth to multiple factors, including the expansion of EMS, consumer electronics, and emerging segments like refrigerators, wearables, and telecom products. They forecast an EBITDA margin increase from 3.9% to 4.1% over the same period, driven by greater backward integration and an expanding share of higher-margin products. However, they also acknowledged potential risks, such as lower-than-expected market growth, loss of key clients, increased competition, and limited bargaining power.

Dixon Technologies reported a 265% increase in net profit for the September 2024 quarter on Thursday. The profit reached Rs 412 crore, boosted by an exceptional gain of Rs 209.6 crore and a rise in mobile phone production. In the same quarter of the previous fiscal year, the profit stood at Rs 113.36 crore. Revenue for the July-September 2024 period also saw a substantial jump of 133%, hitting Rs 11,534 crore compared to Rs 4,944 crore a year ago. EBITDA for the quarter was Rs 420 crore, up 110% year-on-year.

Dixon Technologies is a leading Indian company focused on design and solutions in the contract manufacturing sector. It produces consumer durables, lighting products, and mobile phones. The firm has established itself as a significant player in India’s consumer electronics and manufacturing industry.