Dixon Technologies valuation reflects headwinds amid demand slowdown

Despite muted Q3 performance, higher input costs and uncertainty over the Vivo joint venture, Dixon Technologies' valuation factors in multiple headwinds, with brokerages divided on outlook

Despite multiple concerns related to a muted performance in the December quarter, higher input costs and uncertainty related to the Vivo joint venture, the stock of electronic manufacturing services major Dixon Technologies (India) is up 13 per cent since the start of February.

 

Prior to the rally this week, the stock had shed over 33 per cent from its highs in November 2025. Post the Q3 results and correction in the price, some brokerages have upgraded the stock.

 

Sales growth in the December quarter was up just 2 per cent year-on-year (Y-o-Y) and adjusted for the lighting segment growth, it came in at 4 per cent.

 

Consumer electronics sales fell 10 per cent over the year-ago quarter due to a slowdown after the festival season.

 

While home appliances grew 13 per cent Y-o-Y on healthy demand for washing machines, the company’s largest segment of mobile phones, with a growth of 5 per cent, saw the lowest rate in the past 16 quarters.

 

Motilal Oswal Research believes that the current demand slowdown is transient for next few quarters and is not a demand destruction issue.

 

Analysts led by Teena Virmani of the brokerage believe that the current market price is already factoring in the worst-case scenario of continued weakness in base smartphone volumes, only one client addition in mobile where discussions are underway, and no volume addition from Vivo over FY26-28. They have a buy rating with an unchanged target price of ₹16,700.

 

During the quarter, the company posted volume of 6.9 million smartphones and expects 7-7.5 million smartphones in Q4. This could amount to 34 million smartphones in FY26, lower than annual guidance of 40 -42 million announced in Q2, points out Elara Securities.

 

Analysts led by Harshit Kapadia of the brokerage say that the outlook remains clouded for mobile volumes. This is on account of the delay in approval of Vivo & HKC joint ventures (JVs) and surging memory module prices, dragging down low-end mobile volumes.

 

The brokerage has cut its earnings for FY26 by 12 per cent while the cuts for FY27 and FY28 earnings were 19 per cent and 22 per cent, respectively. This is based on the delay in approval of the Vivo & HKC JV and lower volume of low-end phones, due to rising memory prices.

 

The analysts, have, however, reiterated their accumulate rating due to the production-linked incentive (PLI) scheme in components and a strong pickup in the non-mobile segments, which may offer respite to earnings volatility. The brokerage has a target price of ₹12,000.

 

Nomura Research has also lowered its mobile volume estimates to 34 million for FY26 while its estimates for FY27 and FY28 are down by 2 million and 3 million units, respectively. This is partly offset by strong traction in the IT hardware segment. While near-term growth will remain soft, analysts led by Siddhartha Bera expect a stronger ramp up from FY27 on new customer additions and from investments on component manufacturing. This will start contributing from H2FY27. Any PLI extension announcement by the government poses upside risk to their estimates. The brokerage lowered operating and net profit estimates by 6-11 per cent over FY26-28. It has a buy rating with a target price of ₹14,678.