Explained — The major reason behind the recent selling pressure in Dixon Technologies

Shares of Dixon Technologies Ltd. have declined 35% in the last three months, having declined to the lowest level since June 2024 as of Tuesday's close.

In a note on Tuesday, brokerage firm Phillip Capital alluded to a sharp fall in volumes of a key Dixon client, Motorola.

Dixon as a firm has significant client dependence on Motorola, which comprises of over 45% of Dixon's total revenue in financial year 2025. The brokerage said that Motorola's volumes have declined sharply in the last two quarters.

During the third quarter, Motorola's volumes are down 20% from last year as the brand faces strong competition from Apple, which resulted in muted sales during the quarter.

"The greater issue is increased outsourcing to Karbonn, as Motorola outsourced 23% of its volumes to Karbonn during the quarter. So, not only did Motorola lose domestic volumes, the increased outsourcing resulted in a 20% year-on-year decline in volumes for Dixon," the brokerage said.

Phillip Capital said that this aligns with its thesis that since mobile phone assembly has little to no moat, the increased competition will result in declining volumes for Dixon from financial year 2027.

Phillip Capital is one of the biggest bears on Dixon Technologies. Its price target of ₹9,085 not only projects a 19% downside potential from current levels, its is the lowest price target on the street for the stock, and the only one below the ₹10,000 per share mark.

Earlier in the day on Wednesday, Ambit Capital cut its price target on Dixon Technologies to ₹11,275 from ₹11,868 earlier, while maintaining its "sell" rating on the stock.

34 analysts have coverage on Dixon Technologies, of which 26 have a "buy" rating, two say "hold", and six have a "sell" rating on the stock. The consensus estimates of price targets imply a potential upside of 49.1% for Dixon's shares.

Shares of Dixon Technologies are trading 1.2% higher at ₹11,375. As of Tuesday's close, the stock had closed at the lowest level since June 2024.