Dixon Technologies shares rally as profit and revenue double in Q3; what management says

Other segments including electronics, home appliances and lighting turned in with moderate volume growth.

According to Nuvama Institutional Equities, Dixon has guided for a steep ramp-up in mobile revenue, which the brokerage estimates would jump from ₹4,200 crore in FY23 to ₹23,000 crore-plus FY26E.

Nuvama likes Dixon's mobile-led high growth roadmap and the accompanying return profile, but it said that the stock has doubled in the past one year and the valuation may cap upside, making this an unfavourable entry point.

"We are positive on Dixon's growth trajectory; however, at 55 times PE (price-earnings) on FY26E, the valuations do not indicate a good entry point, in our view," Nuvama said while retaining 'Hold' due to rich valuations. The brokerage has also upped its target price to ₹5,700 from ₹5,150 per share.

Foreign brokerage house HSBC has recommended a 'Buy' call on the counter with a target of ₹6,550, which Dixon has already breached. The brokerage said that customer additions, portfolio expansion will drive strong growth, and an increased share of customers' outsourcing also bode well for the company.

Morgan Stanley, on the other hand, has an 'Underweight' rating on the stock, citing that management refrained from giving revenue guidance. Furthermore, management expects the mobile segment to remain the latest growth contributor.

In a conversation with CNBC-TV18, Atul Lall, Vice Chairman and MD of Dixon Technologies said the import duty cut on mobile phone components is a big positive for the industry. The company will be passing on these duty cuts to its customers, he said.

"This has been industry's request, and this is a big gift the finance ministry has given us before the budget. We were asking for component duty cuts, which has happened, we were asking for certain clarifications on certain components, which has been done. And beyond mobile, also, there were certain exemption notifications, on which there were certain element of doubt, those have been extended," Lall said.

"So, these are extremely positive things. Now, in our case, we will be passing on these duty cuts to our customers. We are a B2B company. Hopefully this is going to give a significant flip to the demand side because let's see how the brands react to it. But undoubtedly, it's a very major positive for us,” he added.

He further said that the contribution of mobile to the company's overall revenue is going to be more than 50% and it is going to be the largest trigger of growth.