Emkay sees Dixon Tech selloff overdone; long-term growth drivers intact

Domestic brokerage Emkay Global has reiterated its constructive long-term view on Dixon Technologies, even as near-term cyclical and execution-related concerns have triggered a sharp correction in the stock. 

 

Dixon shares have declined 24 per cent over the past one month and 63 per cent over six months, reflecting investor anxiety around multiple headwinds. However, Emkay believes current valuations are discounting a bear-case scenario, while ignoring several structural growth drivers that remain firmly in place.

 

The recent de-rating has been driven by four key concerns. First, a sharp surge in global memory prices has raised fears of higher smartphone prices and potential demand disruption, which could weigh on mobile production volumes. Second, delays in approval under the PLI 3.0 scheme for the proposed Vivo/HKC joint venture, seen as a major growth and margin catalyst from FY27, have created an overhang, although management expects closure by January 2026. Third, Dixon’s key client Xiaomi has seen a market-share decline of about 350 basis points (bps) year-on-year (Y-o-Y) in 9M CY25, raising concerns about volume sustainability. Lastly, Dixon has reportedly lost some share within Motorola, as the brand has increased outsourcing to a peer, denting the high-growth and margin-expansion narrative.

 

Acknowledging these near-term risks, Emkay has cut its smartphone volume estimates (excluding Samsung) by 27 per cent, 20 per cent and 5 per cent for FY26E, FY27E and FY28E, respectively, to around 32 million, 46 million and 56 million units. Earnings estimates have also been reduced by 19-13 per cent over FY26-28, while the target price has been lowered by 20 per cent to ₹15,200. That said, Emkay argues that the market reaction has been disproportionate to the actual risks.

 

The brokerage believes several alternative scenarios are being overlooked. Even if the Vivo/HKC JV does not materialise, Dixon could still organically scale up Vivo volumes to 7 million units in FY27 and 11 million units in FY28, driven by Vivo’s global ambitions and potential ramp-up with BBK group brands such as Oppo and Realme. Management has guided for even higher volumes of 20-22 million units over time. Additionally, Dixon’s overall mobile volumes are unlikely to suffer materially from Xiaomi’s share loss, given new ODM client additions, rising contribution from Oppo (now accounting for around 25 per cent of business), and increasing absolute volumes with Motorola, including exports.

 

Beyond smartphones, Emkay highlights strong momentum across other verticals. The IT hardware segment is seeing a ramp-up, with Dixon benefiting from localisation opportunities as India looks to replace 10-20 per cent of laptop imports. Strong order books from global brands such as HP, Lenovo and Asus, coupled with incentives under the IT hardware PLI scheme, provide further visibility. Telecom is another key growth driver, with revenues expected to scale up two to three times over FY26-27, aided by large overseas orders for microwave radios.

 

Dixon is also exploring new opportunities in servers, high-margin PCBA, automotive displays and backward integration initiatives such as camera modules, adding to its long-term optionality. Emkay estimates a robust 50 per cent volume CAGR over FY25-28 and industry-leading return ratios of over 30 per cent.

 

At the current valuation of about 31x FY28E earnings, Emkay believes Dixon offers an attractive risk-reward profile. While near-term volatility may persist, the brokerage retains a ‘Buy’ rating, arguing that the company’s structural growth story remains firmly intact despite temporary cyclical headwinds.  On the bourses, Dixon Technologies shares dropped up to 3.85 per cent to an intraday low of ₹10,276.05. Around 1:05 PM, Dixon Technologies shares were trading 0.54 per cent lower at ₹10,630. By comparison, BSE Sensex was trading 0.19 per cent higher at 82,333.03 levels.

   

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