Dixon Tech shares continue to rebound; CLSA sees 45% upside despite concerns

Shares of Dixon Technologies Ltd. are trading more than 2% higher on Friday, December 12, after brokerage firm CLSA reiterated its 'Outperform' rating on the stock.

The brokerage has a 12-month price target of ₹18,800, which implies a potential upside of 45% from current levels.

The stock has fallen 17% over the past month, largely because of concerns about possible cuts to its earnings per share (EPS) estimates for FY27.

One of the key issues is that Dixon Technologies is still awaiting Press Note 3 approval for its joint venture with Vivo. This venture is expected to contribute around 20 million units to smartphone production out of an estimated 58 million to 64 million units in FY27 and FY28.

Since it is a 51 to 49 joint venture, CLSA believes that even if only a small part of this volume materialises in FY28, the company's EPS could be impacted by 13% in FY27 and 7% in FY28.

Another concern is that the company has not yet received approvals to set up its components facilities under the Electronic Components Manufacturing Scheme. A third worry is the limited visibility on medium term growth, especially once the smartphone market reaches saturation and incremental gains become harder to achieve.

Despite these challenges, CLSA's scenario analysis shows that even if there are significant delays in the start of Vivo's operations, the stock is still trading at 44 times its September 2027 projected earnings, a valuation that the brokerage does not find demanding.

Meanwhile, the Serious Fraud Investigation Office under the Ministry of Corporate Affairs is reportedly preparing to file a chargesheet against Chinese smartphone maker Vivo in December. This has further clouded the outlook for the Dixon Technologies and Vivo joint venture, which is waiting for Press Note 3 approval.

CLSA said that it does not take a view on the outcome of the SFIO investigation or the approval process for Press Note 3. However, the brokerage believes that in the worst case scenario where the joint venture is not approved, Vivo could lose market share to other smartphone brands. This shift could create an opportunity for Dixon Technologies to capture a share of the displaced production volumes.

Of the 35 analysts tracking Dixon Tech, 27 of them have a 'Buy' recommendation, two of them say 'Hold', while six others have a 'Sell' rating on the stock.

Dixon Tech shares are trading 1.88% higher on Friday at ₹13,232. The stock has declined nearly 27% so far in 2025.