Recommendation from Consumer Durables Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]

Dixon Technologies (India) Ltd : ELECTRONICS MANUFACTURING POWERHOUSE

HERE IS WHY
✓  Strong growth with expanding scale
✓  Multiple new businesses gaining traction
✓  Backward integration improving value addition

I ndia’s electronics manufacturing industry is entering a structural growth phase, supported by rising domestic electronics consumption, increasing localisation, government incentives and a growing shift of global supply chains towards India. With strong execution, multiple new growth engines and improving export opportunities, we recommend Dixon Technologies (India) Ltd. as our Choice Scrip. Dixon is one of India’s leading electronics manufacturing services (EMS) companies, operating across mobile phones, telecom and networking products, IT hardware, consumer electronics, home appliances and other electronics products. The company follows an assetbacked manufacturing model and works with several leading global and domestic brands.

Dixon reported a mixed Q1 FY27 performance, with revenue growing 21 per cent YoY to ₹15,548 crore, while operating profit declined 4 per cent to ₹463 crore as OPM moderated to 3.0 per cent from 3.8 per cent. EBITDA declined 2 per cent to ₹472 crore. Consequently, PAT after NCI fell 3 per cent YoY to ₹218 crore. However, the headline decline in profitability needs to be viewed in context, as the previous-year quarter had benefited from higher other income and exceptional items. The company continues to deliver strong revenue growth, supported by capacity expansion and increasing scale across its electronics manufacturing businesses. With robust long-term demand and a strong execution pipeline, the temporary margin pressure does not alter our positive outlook.

Its Mobile & Other EMS division remains the core revenue engine, while newer businesses such as IT hardware, telecom, display modules, camera modules, SSDs and data-centre-related hardware. In FY26, Mobile & Other EMS contributed around 91 per cent of consolidated revenue and diversification can increase the addressable market while improving localisation and value addition over time. IT hardware is emerging as one of Dixon’s most promising non-mobile businesses. The company has already started commercial production for customers including HP, ASUS, Lenovo and Acer. Management expects the IT hardware business to scale substantially, supported by a strong Order Book and new manufacturing capacity. One of Dixon’s most important strategic priorities is increasing backward integration. The company is expanding into camera modules, display assemblies, SSDs, power supplies and mechanical components. Q-Tech camera-module capacity is being expanded substantially, while display manufacturing capacity is also being developed for mobile, IT hardware and automotive applications. This strategy is important because EMS businesses generally operate on relatively thin margins. Increasing localisation and manufacturing more critical components internally can improve supplychain resilience, increase value addition and create scope for gradual margin improvement. Exports are becoming increasingly important for Dixon. The company ended FY26 with around 32.6 million smartphones, including approximately 5 million exported units.

Dixon maintains debt-to-equity ratio of 0.21 and interest coverage of around 21x further support its financial position. Dixon trades at a P/E of 46.2x. The stock’s three-year median P/E of 117.9x indicates that the current multiple is substantially below its historical median, although it remains above the industry P/E of 39.6x. The company also has strong fundamental ratios, including ROCE of 42.0 per cent, ROE of 37.4 per cent. The PEG ratio of 0.60 further suggests that the valuation needs to be viewed alongside the company’s unusually strong historical earnings growth. Hence, we recommend a BUY.

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