Dixon Technologies share price drops 14% as valuation worries offset in-line Q3 performance

Shares of Dixon Technologies tumbled 14% in Tuesday's trade, January 21, dropping to ₹15,118 apiece, despite posting stellar numbers for the December-ending quarter as valuation concerns weighed on the stock, dragging it lower.

The company, on Monday post-market hours, reported better-than-expected numbers for the December quarter (Q3FY25), though it missed expectations on the net profit front due to higher depreciation, interest, and minority interest.

It posted a 77.5% YoY rise in its consolidated net profit, reaching ₹171.19 crore, compared to ₹96.44 crore in the year-ago period.

Sequentially, the consolidated net profit was down 56%. Its consolidated revenue from operations came in at ₹10,453.68 crore, up from ₹4,818.25 crore in Q3FY24, reflecting a YoY surge of nearly 117%. Sequentially, the revenue declined by 9.4%.

On the operational front, the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) surged to ₹398 crore, up 113% year-on-year from ₹187 crore, while the EBITDA margin stood at 3.7%, 100 basis points lower than 3.8% in the same quarter of the previous calendar year.

Looking at the segment performance, the revenue from the Consumer Electronics & Appliances Division dropped by 32% year-on-year and fell by more than half from the September quarter to ₹633 crore.

The operating profit for this division declined by 31% year-on-year and 58% quarter-on-quarter to ₹22 crore. Last year, this segment contributed 19% to Dixon’s overall revenue; this quarter, it accounted for only 6%.

Revenue from the Home Appliances segment stood at ₹315 crore, up 9% year-on-year but down 29% from the September quarter. The Lighting Products segment posted revenue of ₹201 crore, reflecting a 7% increase year-on-year but a 14% sequential decline.

Should you buy Dixon shares post Q3 numbers?

Following the company’s December numbers, analysts remained divided on the stock. Motilal Oswal retained its 'buy' rating on the stock and raised its target price to ₹20,500 apiece.

The brokerage said the company's revenue growth will mainly be driven by EMS (including mobile and IT hardware) and emerging segments such as refrigerators, wearables, hearables, and telecom networking products. It expects an EBITDA margin of 3.7%/3.8%/4.0% for FY25/FY26/FY27, driven by increased backward integration. This is expected to result in a PAT CAGR of 60% over FY24-FY27.

Nuvama Institutional Equities, on the other hand, retained its 'hold' rating on the stock but raised its target price to ₹18,790 apiece.

Global brokerage firm Jefferies reiterated its "underperform" recommendation with a target price of ₹12,600 apiece. At 107 times FY26 price-to-earnings, Dixon's risk-reward is stretched, according to Jefferies.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions