Dixon Technologies that hit a record high of Rs 4,899 in the morning trade on February 5 has rallied more than 100 percent in the last year and more than 20 percent in 2020.
The new year has been good for the stock that been hitting fresh highs almost daily. Experts say the future is bright for the design-focused and solutions company that manufactures products in consumer durables, lighting and mobile phone spaces.
Dixon Technologies listed on the bourses in September 2017 and has since rallied by over 60 percent.
The stock can surge past Rs 5,000 in the next 12 months, hence it would be wise to pick the stock on decline towards Rs 4,500, say experts.
The December quarter results were also encouraging. The net sales for the December quarter increased by 31 percent on a YoY basis, whereas the bottom line surged by 54 percent.
The company has shown good results especially in consumer electronics, lighting, and mobile businesses.
“The company seems optimistic for the current financial year due to new customers’ acquisition, expansion in the scale of operations and increase in original designer manufacturer mix. Recently, Dixon Technologies (India) Limited and Samsung India Electronics Pvt Ltd have entered into an agreement for the manufacturing of LED TVs,” said Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor.
Dixon is focusing on client addition, backward integration and capacity extension to meet the growing demands. It is also targeting global markets with its increased size and scale in the lighting business, Garg said.
“All the above-discussed factors are attracting the investors and contributing to the rally in Dixon Tech,” he said.
The Budget 2020 might not have met expectations of many D-Street analysts, but it was good for certain sectors. Dixon Technologies, too, will benefit from various proposals introduced by the Finance Minister Nirmala Sitharaman.
The Budget proposed an effective surge in the import duty of printed circuit boards of mobile phones, which will restrict the imports.
The government revised the custom duty on Printed Circuit Board (PCB) assembly from 10% to 20%, which may benefit Dixon Technologies.
High growth in consumer electronics and increasing electronic manufacturing services present a huge opportunity to players like Dixon, say experts.
“Dixon Technologies bears a charter of major printed circuit board (PCB) manufacturer in India and increment in the import duty at their critical product is going to deliver high revenues in the books of the company,” Kuldeep Tomar, Director, Advisorymandi.com, told Moneycontrol.
What should investors do?
Seeing the strong surge in the stock, experts advise investors to hold onto to it as the rally might not be over yet.
Dixon Technologies witnessed a handsome 213 percent return in less than six months—from a low of 1,560 in August 2019 to the recent high of 4,895.
Make in India theme is the key reason for the stellar performance of the company. Synergy with marquee names like Samsung and Xiaomi is also a big factor in the company’s growth, say experts.
“The stock has already rallied a lot but we will recommend investors to hold this stock for the long term, as the future looks very bright in terms of growth and it has quality management who delivers results to their projections,” Santosh Meena, Senior Analyst, TradingBells, told Moneycontrol.
Garg of CapitalVia also advised investors to hold on to Dixon Technologies instead of booking profits, keeping in view the upcoming projects, the company’s focus on client addition, backward integration, capacity extension, and the current capital markets scenario.
“The stock is likely to consolidate in the range of Rs 4,500 to Rs 4,900 levels, any breakout will result in more upside,” he said.
Should new investors jump in?
New investors should wait for a dip before getting into the stock, say experts. There is a high potential for the stock to hit Rs 5,000 in the next 12 months.
Technically, the stock is trading above its important moving averages, which indicates that the stock has the potential to generate decent returns.
“I would like to recommend investors to add Dixon Tech to your portfolio in any dip. Stock is trading near 52-week high. Any dip around 4,500, will be a good bet with favourable risk to reward,” Garg sid.
Meena of TradingBells is of the view that the stock is trading with trailing PE of 50, which is on the expensive side, but it has a robust growth prospect of 30%/50% revenue/earnings CAGR over FY19-22E and fundamental ratios are supporting the valuation.
“Investors should accumulate this stock in Rs 4,400- Rs 4,200 zone, where 5,100 kinds of level can be achieved in the near term,” he said.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.