Dixon Technologies gets a downgrade from Goldman Sachs over three major concerns

First, it does not see an increase in the proportion of Dixon manufacturing non-Apple phones in India over the next five years. Around 29% non-Apple phones in this country are currently being manufactured by Dixon.

The brokerage also said that while the overall IT hardware opportunity is sizeable, Dixon's ability to win contracts in IT hardware is not as evident as in mobile phones.

In an interaction with CNBC-TV18 on December 12, 2023, Dixon CFO Saurabh Gupta said that the total market size for IT hardware product is $20 billion. It is looking to capture 10% to 15% volume next year in the IT hardware. He further said that there will be a total opportunity of ₹4,500 crore IT hardware opportunity in financial year 2026 led by Lenovo.

Gupta further said that IT hardware will be the next biggest opportunity after mobile for the company.

Other B2C Electronic Manufacturing Services (EMS) verticals, which used to be a large focus for Dixon in the past, are witnessing intense competition, Goldman Sachs wrote in its note.

The brokerage also wrote that the stock is trading at 52 times financial year 2025, which is a 30% premium over the other Indian EMS peers and a premium of over five times over global peers.

Out of the 29 analysts that track Dixon, 17 of them have maintained a "buy" recommendation on the stock, while eight of them have a "sell" rating.

Dixon's shares have surged 80% over the last 12-months. The stock is trading 3.4% lower on Monday at ₹6,330.