Broker’s Call: Dixon Technologies (Buy)
Margin pressure was driven by the expiry of Mobile PLI 1.0 incentives and a sharp increase in global memory prices, supported by rising demand from AI infrastructure and data centres
Keynote Capitals Target: Dixon Technologies (India) reported a robust 47 per cent YoY revenue growth in Q2 FY27, however, gross and EBITDA margins contracted by 202 and 104 bps respectively. Margin pressure was caused by the expiry of Mobile PLI 1.0 incentives and a surge in global memory prices, fueled by heightened demand from AI infrastructure and data centres.
Following the lapse of Mobile PLI 1.0 in March 2026, the Indian government unveiled the Mobile Phone Manufacturing Scheme (MPMS) in August 2026, with a budget of ₹62,500 crore over five years (FY27-31). Dixon is exploring opportunities in advanced electronics manufacturing, including silicon photonics, optical transceivers, and advanced semiconductor packaging to leverage the burgeoning demand from AI infrastructure, data centres, and high-speed networking.
The company is also scouting for strategic partnerships to establish these capabilities in India, aiming to venture into technologically sophisticated, higher-margin manufacturing segments. However, these plans are still in their infancy stage, lacking any revenue guidance or commercialisation timelines from management. Despite the short-term margin pressures stemming from the expiration of Mobile PLI 1.0 and surging input costs, Dixon's medium-term growth outlook remains promising.
The company anticipates growth from the swift scale-up of IT hardware and telecom businesses, along with higher mobile manufacturing volumes backed by the Vivo JV integration. Moreover, backward integration into camera and fingerprint modules, display assembly, and other crucial components is expected to enhance domestic value addition and bolster margin expansion.
The policy environment is also propitious, bolstered by government incentives for electronics manufacturing and customs duty exemptions on specified inputs. Factoring these factors, Keynote Capitals has revised its estimates and retains its BUY rating. Applying a P/E multiple of approximately 60x to FY28E earnings, they project a target price of ₹14,417, representing a potential upside of around 18 per cent.
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