Dixon Technologies stock surges 6%, hits all-time high on Lenovo contract

Extending their bullish streak into the second consecutive trading session, Dixon Technologies (India) shares witnessed a 6.1% surge, reaching a new all-time high of ₹6,765 apiece during Tuesday's intraday trade.

This surge followed the company's announcement on Monday that its wholly-owned subsidiary, Padget Electronics Private Limited, secured a manufacturing contract from Lenovo for IT hardware products, i.e., laptops and notebooks, under the Production Linked Incentive 2.0 Scheme (“PLI”). The finalisation of this agreement is expected through the signing of a definitive agreement, according to the company's exchange filing. 

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On November 30, Padget Electronics commenced smartphone production for Xiaomi at its newly inaugurated manufacturing facility in the Noida district of Uttar Pradesh. The plant has an annual capacity of 25 million units.

Dixon Technologies is a leading manufacturer of products for key consumer durable brands in India. It also provides solutions in reverse logistics.

The company's shares, which saw a decline of almost 29% in CY22, have shown a remarkable rebound in the current year. They have rallied 68% in CY23 so far, spiking from ₹3,927 to ₹6,605 apiece, and are up by 159% from their one-year low of ₹2,553.

Out of the past seven months, the stock closed five positively, with the most notable monthly performance in May, registering a remarkable gain of 33%.

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According to analysts, the company will benefit in the long run from scaling up its existing verticals, new customer additions, and expansion into other verticals such as refrigerators, LED monitors, AC components, and other hardware products.

The Indian electronics and consumer durable industry, valued at around ₹4,00,000 crore, presents significant growth prospects. Dixon, a key player in the electronic outsourcing business, benefits from its leadership position, according to brokerage firm Sharekhan.

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Expanded capacity in consumer electronics and home appliances, coupled with a PLI scheme license for mobile phones, is likely to drive revenue growth momentum. In contrast, the margin may expand due to economies of scale and automation in the lighting business, the brokerage added.

For the September quarter, the company's consolidated net profit surged by 48% year-on-year to ₹113 crore, while consolidated revenues for Q2FY24 increased by 27.82% to ₹4,943 crore compared to ₹3,867 crore in Q2FY23.

The operating profit also showed significant growth, reaching ₹199 crore, a 37.24% YoY increase, while the operating profit margin remained unchanged at 4%, both on a YoY and QoQ basis.

At 10:15 AM, the stock was trading with a gain of ₹3.63% at ₹6,605 apiece. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.