Why Dixon Technologies Share Price is Rising

Editor's note: Dixon Technologies is the biggest story in the stock market these days.

Many analysts have turned bullish on the stock.

Meanwhile, the company continues to expand its collaborations via its subsidiary Padget Electronics.

On 27 September 2023, Padget Electronics entered into an agreement with Chinese mobile giant Xiaomi for the manufacturing and supply of smart phones and related products.

The said manufacturing will take place at Padget's manufacturing facility in Noida, Uttar Pradesh.

This development sent the company's stock price to a new 52-week high of Rs 5,379 on 28 September 2023.

In August 2023, we covered a detailed editorial explaining other reasons why the stock is on a roll.

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Why Dixon Technologies Share Price is Rising

Stocks are sensitive to the information, news, policies, laws, regulations, etc. The market considers all factors and then reacts to all the information and news available.

So, when a government actively seeks to make changes to rules and regulations for a particular industry, the impact on the stocks can be off the charts.

Just take this recent example. Over the weekend, India imposed anti-dumping duty on optical fibre imports from China, Korea and Indonesia.

On Monday, shares of companies involved in the optical fibre space spiked 20%.

A few days ago, the Indian government put a ban on exports of rice to cool the food inflation in the country. Although this move helped reduce the price within the country, it created a shortage of rice supply at a global level, causing inflation and situations like stock hoarding and panic buying.

Similarly, the government recently banned the import of laptops and tablets. This move from the government brought the focus of investors on manufacturing companies like Dixon Technologies which manufactures consumer electronics domestically.

Resultantly, shares of Dixon spiked once the news was out.

In fact, shares of Dixon Technologies have been on an uptrend for the past two months. Let's find out what is driving this stock's rally.

#1 Strong Q1 results

Dixon Technologies reported a consolidated revenue of Rs 32.7 billion (bn) for the quarter ended 30 June 2023. The revenue from operations increased by 15% as compared to the corresponding period of the previous year.

For the same period, the company reported a net profit of Rs 670 million (m), a growth of 48% compared to the corresponding period last year.

The growth in revenue was across its five core segments: consumer electronics, lighting products, home appliances, mobile and EMS division, and security systems. The mobile and EMS section saw the highest growth, at 27%.

The company also continues to implement its price hike strategy. It expects to continue growing its business and also add new products to the portfolio in the coming quarters.

#2 Recent ban on laptops among other products

The government of India last week imposed import restrictions on laptops, tablets, and some types of computers.

This move is intended to be promoting domestic manufacturing as well as limit supplies from China, as the country has security worries about such products.

Companies would now be required to obtain an import license under the new laws.

The government sees a clear opportunity for Indian manufacturers to fill the gap, since electronics imports, including laptops, tablets, and personal computers, accounted for US$19.7 bn between April and June 2023.

And it's expanding at a rate of roughly 6% each year. Government wants to encourage the domestic manufacturing sector.

This restriction may drive the corporations to look into opportunities for local production in order to continue efficiently serving the Indian market. Companies like Dixon Technologies are expected to benefit and make the most out of the situation.

#3 Government support

The domestic electronics hardware manufacturing sector faces lack of a level playing field vis-a-vis competing nations. The sector suffers disability of around 8.5-11% on account of lack of adequate infrastructure, domestic supply chain and logistics, high cost of finance, among other reasons.

The vision of National Policy on Electronics 2019 (NPE 2019) is to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by improving capabilities for developing core components and creating an enabling environment for the industry to compete globally.

The government has also come out with a big production linked incentive scheme (PLI) for large scale electronics manufacturing.

This has already offered a boost to domestic manufacturing companies. It continues to attract large investments in mobile phone manufacturing and specified electronic components, including assembly, testing, marking and packaging (ATMP) units.

In the long run, the scheme is expected to tremendously boost the electronics manufacturing landscape and establish India at the global level in electronics sector.

What next?

Dixon Technologies is planning Android base solutions from Google from the second quarter of the current financial year. It will roll out Tizen operating system from Samsung in the third quarter.

The company is making further investments in the manufacturing facilities for LED bars. It hopes to start production for internal consumption soon.

The company is also entering into the space of commercial displays for advertisements and information. It is also looking for interactive boards for the purpose of education, presentation, and entertainment. The company has already secured 4-5 initial orders for the same.

The company will not only benefit from the increased manufacturing opportunities due to import restrictions but also the several products in its pipeline.

Update: Apart from this, the company could also emerge as a beneficiary of the PLI scheme for IT hardware.

Dixon is in talks with IT hardware companies based in the US and China for the production of laptops under the revised PLI program for the segment.

Talks are at an advanced stage with two clients, likely HP and Lenovo, which could help the electronics manufacturing services player meet incremental production targets under the revised PLI scheme.

How Dixon Technologies shares have performed recently

Dixon shares have spiked around 20% in the past five trading sessions. The shares have gained 71.1% in the last six months.

The shares reached a 52-week high of Rs 4,816.85 on 4 August 2023 and a 52-week low of Rs 2,553 on 30 January 2023.

About Dixon Technologies

Dixon Technologies is engaged into electronic manufacturing services (EMS) space in India. It offers design-focused solutions in consumer durables, home appliances, lighting, mobile phones and security devices.

It also offers repairing and refurbishment services for a wide range of products including set top boxes, mobile phones and LED TV panels.

For more details look, take a look at Dixon Technologies' financial factsheet.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...