Dixon Tech stock drops sharply after hitting record high on strong Q2 results. Where’s it headed next?

Record-breaking earnings drove Dixon Technologies’ share price to a new high on Friday, October 25, before sharp profit booking saw it drop 18 per cent from its peak. With strong performance indicators and new partnerships, brokerages remain optimistic about the company’s future prospects.

Shares of Dixon Technologies hit an all-time high of ₹15,999.95 on Friday morning, following the release of stellar quarterly earnings for the second quarter of FY2025. However, this momentum soon faced a pullback as profit booking set in, sending the stock tumbling over 18 per cent from its record high to an intraday low of ₹13,055.30.

Q2FY25 Earnings Highlights

Dixon Technologies reported a staggering 265 per cent year-on-year (YoY) increase in net profit for the July-September quarter, posting a profit of ₹412 crore, a sharp rise from ₹113.4 crore in the same period last year. This profit jump was fueled by higher mobile phone production and an exceptional one-time gain of ₹209.6 crore. Revenue for Q2FY25 also more than doubled with a 120 per cent YoY increase to ₹18,116 crore as compared to ₹4,944 crore in Q2FY24.

The company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) also surged by 110 per cent YoY to ₹420 crore. However, EBITDA margins experienced a slight squeeze, dropping 30 basis points from 4 per cent in Q2FY24 to 3.7 per cent in Q2FY25. Despite the margin compression, Dixon Technologies has projected that EBITDA margins will expand to 4.5 per cent over the next 18 months.

Brokerage Views on Dixon Technologies

Motilal Oswal reiterated its 'Buy' recommendation on Dixon Technologies, assigning a target price of ₹17,500, implying a 34 per cent upside from the day’s low.

The brokerage noted that Dixon delivered impressive results, exceeding expectations due to strong performance in its mobile and EMS segments, supported by the recent integration of Ismartu from mid-August 2024. It pointed out that Dixon is capitalising on high volumes from current mobile customers and is actively pursuing the addition of another global brand to its client list. MOSL expects Dixon to continue solidifying its market position across various segments, expand into new areas, and advance its backward integration efforts while also enhancing its Original Design Manufacturing (ODM) mix.

Through its partnership with HKC Corp. for display manufacturing, Dixon is poised to secure a greater share in the mobile and LED TV components market. Additionally, Dixon is exploring potential collaborations with international players to venture into open-cell manufacturing. Motilal Oswal subsequently revised its earnings estimates for Dixon, raising them by 13 per cent for FY25, and by 5 per cent each for FY26 and FY27.

Meanwhile, Nuvama has taken a slightly conservative stance, maintaining a 'Hold' rating with a target price of ₹16,100, which implies an upside of more than 23 per cent. Nuvama acknowledged Dixon’s robust performance in Q2FY25, with PAT surging by 261 per cent YoY, a result primarily attributed to investment gains. Even after adjusting for this one-time gain, Dixon’s adjusted PAT rose by 123 per cent year-on-year to ₹255 crore, surpassing Nuvama's expectations by 20 per cent.

According to Nuvama, this strong performance underscores Dixon’s operational excellence, especially in a competitive landscape. Following these earnings, Nuvama increased its earnings per share (EPS) estimates for FY25–27 by up to 23 per cent. However, Nuvama retained its 'Hold' rating as it sees limited upside potential from current levels, suggesting that the stock is currently trading close to fair value.

Stock Price Trend

The stock has given multibagger returns in the last one year, surging 176.5 per cent. In 2024 till date, the stock has rallied 99 per cent. It is down almost 4 per cent in October so far after eight straight months of gains since January. Apart from October, it declined just in January, down around 9 per cent. Meanwhile, it rallied over 11 per cent each in February, March and April, over 12 per cent in May, over 27 per cent in June, 1 per cent in July, 9 per cent in August, and 5 per cent in September.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.