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Dixon Tech Q4 results – Soft quarter; robust growth, margin outlook intact

Dixon Technologies Ltd.’s revenue/Ebitda/profit after tax in Q4 grew 52%/17%/21% YoY, though missed our estimates by 15-20%, dragged by lower revenue in all the key segments. Outlook for FY25 remains strong, led by mobiles; Ebitda margin is expected to sustain above 4%.

Dixon aims to sell ~40 million units mobiles (including 10 million to Samsung) in FY25E. A large global brand is likely to be onboarded in three-four months. New customer having better margins, backward integration and operating leverage will drive segment margin. It is deepening manufacturing strength with focus on backward integration (PCB, injection moulding, etc; near finalization of a tech partner for display module).

FY25 capex should be ~Rs 5 billion (mobile display, PCB etc), funded via CFO. Dixon will continue to explore high growth segments with focus on RoCE. We broadly maintain FY25E earnings but increase 5% in FY26E on better growth expectations.

On robust outlook, we estimate 27%/27%/34% CAGR in revenue/ Ebitda/PAT over FY24-26E with ~4% Ebitda margin and high ~24%/37% RoE/RoIC.

New customer addition, strong traction in mobile and fast ramp up in new segments (telecom hardware, laptops, refrigerators, WM) would drive this growth.

On rich valuation, we maintain Hold rating with a higher Rs 8,480 target price (75 times FY26E price/earning; earlier Rs 7,538 at 70 times). Systematix

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