Dixon Technologies stock weighed down by the competition concerns

Increasing competition in the electronics manufacturing services (EMS) industry is impacting valuations.

 

Market leader Dixon Technologies has been hit hard though it remains the leader in an industry with strong growth.

 

Listed players such as Kaynes Technology, Avalon Technologies, Syrma SGS Technology, Cyient DLM, Data Patterns, Dixon, and Amber Enterprises have all seen some price correction. This comes despite orders from aerospace, industrials, automotive, and infrastructure sector clients. 

 

Increasing competition has led to investors pulling back valuations.

 

EMS players have big capex plans driven by policies like production-linked incentive scheme (PLI). The aggregate order book of the seven companies mentioned above saw growth rates of over 20 per cent year-on-year (Y-o-Y) in March 2025.

 

In aggregate, the industry may log 30 per cent growth rates in revenue and earnings before interest, taxes, depreciation and amortisation (Ebitda) but margins may move lower.

 

Dixon has a healthy order book, and its anchor customer (Motorola) is ramping up export volumes to North America. Order inflows from Xiaomi and Longcheer have also risen. 

 

Dixon is constructing a 1 million sq. ft. mobile manufacturing facility and a display module plant, and plans to double capacity. Over time, it will invest $3 billion in capital expenditure (capex).

 

Dixon reported 120 per cent Y-o-Y revenue growth (driven by mobile segment) in FY25, followed by Amber at 48 per cent growth, led by rising demand in consumer durables, and Kaynes was at 51 per cent growth, led by industrials. Data Patterns, Avalon Syrma and Cyiendt had revenue growth above 20 per cent.

 

Aggregate Ebitda grew 73 per cent Y-o-Y to ₹3,500 crore in FY25, with margins contracting 40 basis points (bps) Y-o-Y to 6 per cent, due to 380 bps decline in Data Patterns. Most other EMS companies saw margin expansions and Ebitda grew for all companies.

 

Dixon’s revenue growth was led by mobiles & EMS (194 per cent), offset by 23 per cent fall in consumer electronics. Home appliances and lighting were flat.

 

Ebitda was up 143 per cent to ₹443 crore, with operating profit margin (OPM) up 39 bps.

 

Adjusted profit after tax (PAT) was higher by 121 per cent to ₹215 crore after adjusting for extraordinary income of ₹250 crore. The volume was 28 million phones in FY25 (6.4 million in FY24) and the management targets 45 million in FY26 and 60 million in FY27. 

 

A new joint venture with Vivo would contribute to this. Dixon hopes to hold or increase existing market share while backward integration should help to maintain margins. This comes as it moved into precision components, mechanical, and camera modules. 

 

Dixon has also started manufacturing Asus and HP laptops along with Lenovo.

 

It is also looking to enter display fabrication. The capex was ₹900 crore in FY25 and will be similar in FY26. This will contribute to IT & hardware in FY26.

 

But consumer electronics’ revenues fell 23 per cent in LED TVs with FY25 volumes at 2.4 million LED TV units from 3 million units in FY24. Washing machines had volumes of 2.9 million compared to 1.6 million.

 

Dixon is targeting revenue of ₹4,500-5,000 crore by FY27.

 

Obviously this assumes that consumer spending remains steady and key customers continue to give orders.

 

The company is applying for PLI schemes in IT (laptops, tablets and hardware), lighting (extrusions, batons, plastics and mechanicals), AC components and telecom (modems, routers and IoT devices).

 

Motorola, which is Dixon’s largest client, has started outsourcing a significant portion of domestic orders to Karbonn. Longcheer (Dixon’s 2nd largest client) may also outsource to Karbonn. The Vivo joint venture (when it begins) is estimated to add ₹8,000 crore to the top line.

 

Dixon and Vivo agreed to a 51:49 joint venture for mobile phone manufacturing.

 

The joint venture is awaiting regulatory approval. Dixon expects to handle two-thirds of Vivo India’s mobile volumes. This would generate revenues of about ₹16,000 crore and Dixon’s share would be half.

 

The stock, even after the 21.5 per cent decline year-to-date in 2025, still trades at a price-to-earnings (PE) of over 55 based on FY26 expected earnings.

 

According to Bloomberg, four of the six analysts polled in June are bearish on the stock, while the remaining two are bullish.

 

Their average one-year target is ₹14,413.17, against Wednesday’s closing price of ₹14,163.20 on the BSE.