Dixon Share Price Jumps 13% in 2 Days, Hits New High on Lenovo Contract Win

Dixon Technologies (India) has witnessed a surge, extending its bullish streak for the second consecutive trading session. On Tuesday, the company's shares soared by 6.1%, reaching a new all-time high of ₹6,765 during intraday trade. Yesterday, on 11th December, the stock jumped over 7%, delivering a total return of 13% in just two days.This surge came after the announcement, its subsidiary, Padget Electronics Private Limited, secured a manufacturing contract from Lenovo for IT hardware products under the Production Linked Incentive 2.0 Scheme ("PLI").

Contract Details

Padget Electronics, Dixon's wholly-owned subsidiary, is set to manufacture laptops and notebooks for Lenovo as part of the PLI scheme. The company anticipates finalizing the agreement through the signing of a definitive agreement, as indicated in the exchange filing. This development follows Padget's recent initiation of smartphone production for Xiaomi at its new manufacturing facility in Uttar Pradesh.

Stock Performance

Dixon Technologies has rebounded in the current year, with shares rallying 68% in CY23. The stock has surged from ₹3,927 to ₹6,605, marking a 159% increase from its one-year low of ₹2,553. After a decline of almost 29% in CY22, the stock has shown resilience and closed positively for five out of the past seven months.

Analyst Insights

Dixon is well-positioned for long-term benefits, driven by scaling up existing verticals, new customer additions, and expansion into diverse product categories such as refrigerators, LED monitors, AC components, and other hardware products. With a leadership position in the electronic outsourcing business, Dixon is expected to capitalize on the growth potential of the Indian electronics and consumer durable industry, valued at around ₹4,00,000 crore.

As per the analyst, Dixon's expanded capacity in consumer electronics and home appliances, coupled with a PLI scheme license for mobile phones, is likely to drive revenue growth momentum. The firm predicts potential margin expansion due to economies of scale and automation in the lighting business.

Financial Performance

For the September quarter, Dixon Technologies reported robust financials, with a consolidated net profit surging by 48% year-on-year to ₹113 crore. Consolidated revenues for Q2FY24 increased by 27.82% to ₹4,943 crore compared to ₹3,867 crore in Q2FY23. The operating profit also showed growth, reaching ₹199 crore, a 37.24% year-on-year increase, while maintaining a steady operating profit margin of 4% on both a yoy and quarter-on-quarter basis.

Final Words

Dixon Technologies' recent achievements, including the Lenovo contract and positive financial performance, highlight its resilience and growth potential. The company's positioning in key electronic sectors, coupled with government initiatives like the PLI scheme, positions Dixon for sustained success in India's dynamic consumer electronics market.