Dixon Tech: CLSA Cuts Target Price To ₹15,800 On Near-Term Headwinds
CLSA has reduced Dixon Technologies' target price to ₹15,800 from ₹18,800 while maintaining its Outperform rating, expecting flat year-on-year revenue growth in Q3 with potential quarter-on-quarter decline. Despite cutting FY26-27 EPS estimates by 16-17%, the brokerage remains optimistic about medium-term recovery driven by backward integration in the smartphone division.
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Dixon Technologies faces near-term headwinds as CLSA significantly reduces its target price, citing expected revenue weakness in the upcoming quarter. The brokerage maintains its positive long-term outlook while acknowledging short-term challenges facing the electronics manufacturing services sector.
CLSA Downgrades Target Amid Q3 Concerns
CLSA has maintained its Outperform rating on Dixon Technologies while substantially cutting the target price to ₹15,800 from ₹18,800. The brokerage expects flat year-on-year revenue growth in Q3 with potential quarter-on-quarter decline, reflecting broader sector challenges.
The revised target price represents a 34.00% upside potential from current levels, despite the significant reduction. CLSA has cut FY26-27 earnings per share estimates by 16.00% and 17.00% respectively, citing lower volumes and margin delays as key concerns.
| Parameter: | Previous | Revised | Change |
|---|---|---|---|
| Target Price: | ₹18,800 | ₹15,800 | -15.96% |
| FY26 EPS Cut: | - | - | -16.00% |
| FY27 EPS Cut: | - | - | -17.00% |
| Upside Potential: | - | 34.00% | - |
Medium-Term Recovery Prospects
Despite near-term challenges, CLSA remains optimistic about Dixon Technologies' medium-term recovery visibility. The brokerage has kept FY28 EPS estimates unchanged, indicating confidence in the company's longer-term trajectory. A key recovery driver identified is margin improvement through backward integration, particularly in the smartphone division.
The smartphone segment represents a crucial revenue driver for Dixon Technologies, and successful backward integration could significantly enhance profitability. CLSA notes that while FY26 guidance cut risk is emerging due to current headwinds, the recovery timeline remains intact.
Sector-Wide Challenges Impact EMS Space
Electronics Manufacturing Services stocks have faced pressure throughout the year due to multiple factors including near-term headwinds, geopolitical tensions, and delays in government grants. These challenges have dampened overall sector sentiment, though analysts maintain bullish long-term perspectives.
Dixon Technologies has witnessed significant drawdown on a year-to-date basis, reflecting broader sector concerns. However, the substantial upside potential indicated by CLSA's revised target suggests the current correction may present opportunities for long-term investors.
Market Outlook and Investment Perspective
The brokerage's analysis highlights the dichotomy between short-term operational challenges and long-term structural growth opportunities in the EMS sector. While immediate quarters may see revenue pressure, the medium-term recovery thesis remains supported by India's electronics manufacturing growth story and Dixon Technologies' strategic positioning.
CLSA's maintained Outperform rating despite the target price cut reflects confidence in the company's ability to navigate current challenges and capitalize on future growth opportunities through operational improvements and market expansion.
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