PremiumThis stock rose from around ₹420 in October 2018 to ₹4,993 currently, surging as much as 1088% in the last 3 years. here's what is leading to the rise in its stock price and should you buy now?
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Shares of Dixon Technology has generated robust returns for its investors in the last 3 years, rising over 1000% in this period. The stock rose from around ₹420 in October 2018 to ₹4,993 currently, surging as much as 1088% in this period. In comparison, the benchmark Sensex has gained a little over 70% in the last 3 years.
An investment of ₹1 lakh in Dixon Tech in October 2018 would have turned to ₹11,88,000 currently.
Its market cap currently stands at over ₹29,000 crore and it has hit a 52-week high of ₹6,240 on the BSE on October 19, 2021. It hit its 52-week low of ₹1,805 on October 30, 2020.
Founded in 1993, Dixon Technologies is an electronics manufacturing services company, based in Noida. It is a contract manufacturer of televisions, LED bulbs, smartphones, washing machines, and CCTV security systems for companies including Philips, Samsung, Panasonic and Xiaomi.
Financials
In the September quarter, the firm reported a 19.63% rise in its consolidated net profit at ₹62.64 crore versus ₹52.36 crore in the year-ago quarter. Meanwhile, its sales surged 71% to ₹2803.78 crore in the quarter under review as against ₹1638.74 crore during the same quarter last year.
The firm's 5-year CAGR growth in revenue stands at 26.7% while 5-year CAGR growth in profit is over 35%.
While the valuations of the firm are as high as per experts, the fundamentals of the firm remain robust.
For FY20-21, the firm reported a 46% YoY rise in revenue and a 33 percent YoY rise in its PAT.
Shareholding
The promoters hold a 34.9% stake in the firm while the remaining 65% of the stake is owned by the public, as per the September quarter shareholding data.
Mutual funds hold an 8% stake in the firm while FIIs have a little over 18% stake. Among individual shareholders, ICICI Prudential Life Insurance has a 1.3% stake in the firm while LIC holds a 3.7%.
Peers
The stock has also outperformed its peers. Just in the last 1 year, the stock has jumped nearly 170%. Among peers, Bajaj Electricals has risen nearly 130%, TTK Prestige has gained 92%, Honeywell Auto has advanced around 50%, and Whirlpool has added 4% in this period.
Going ahead
Going ahead the firm is likely to benefit heavily from the government’s Production Linked Incentive (PLI) scheme. It has already signed a deal with laptop maker Acer to manufacture laptops for the domestic market as well as exports. It also has plans to acquire a manufacturing unit under the Bharti Group to start making telecom gears under the PLI scheme.
"Dixon has got a PLI license for the telecom sector. We are proposing to do a joint venture with the Bharti Group. The first manufacturing plant that we will be acquiring will be Bharti's plant in Ludhiana which used to manufacture telephones," Dixon Technologies executive chairman Sunil Vachani said.
The Department of Telecom (DoT) has shortlisted only 31 companies including Dixon Technologies under the production-linked incentive scheme.
A big push to government schemes like Make in India, PLI will prove very profitable for the firm. However, as per experts the valuation of the firm is pretty high, so it is advisable to wait for a dip before accumulating. However, investors who already hold the stock should not sell just yet.
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