InvestorQ : What is the reason for the rally in the stock of Dixon Technologies?
Juvina Maggie made post

What is the reason for the rally in the stock of Dixon Technologies?

Deepa Salunkhe answered.
3 years ago

On Friday, the stock of Dixon Technologies hit the 52-week high of Rs.12,539 as there was constant demand for the stock. Dixon specializes in outsourcing activity and is expected to be one of the big beneficiaries of the government's Atmanirbhar Bharat program. That has apparently been one of the key triggers for the stock.

Recently, Dixon Technologies also surged by nearly 37% in the last couple of months after the PLI scheme was announced as Dixon would be a direct beneficiary. Dixon Technologies has dominant capacity market share across various categories including TVs, mobile phones, washing machines, set top boxes and many more. It is also an approved PLI manufacturer.

The potential is huge as of now. The Indian electronics and consumer durable industry is worth nearly Rs.400,000 crore and is expected to grow rapidly to Rs.600,000 crore by the year 2024. The low penetration level offers a huge opportunity to players like Dixon. The idea is to substitute needless imports with domestic manufacturing.

The government has banned import of fully-assembled ACs with refrigerants. This is an area where Dixon is active and this type of look-inward policy is expected to be extended to many more products. According to Credit Suisse, this sector is expected to generate $160 billion of fresh sales by the year 2026.

In the next few years, the Atma Nirbhar scheme is likely to be extended to other products like smart phones via the PLI scheme and eventually include laptops, handsets etc. In short, the opportunity for Dixon in the next few years is humongous. Even in valuation terms, the stock is at 37 times its forward earnings, which is reasonable for the growth prospects.