The share price of Dixon Technologies is in focus after the HKC JV. Though it saw some gains on the back of the news, the share price has fallen 40% in the past six months. International brokerage house Jefferies continues to maintain a cautious stance on the stock. This is because of Dixon’s valuation. They pointed out that despite the sharp correction, it still trades at 47x FY27 PE. This is above most peers.
In a recent note, Jefferies retained a ‘Hold’ rating on the electronics manufacturing services (EMS) company with a price target of Rs 11,350, implying around 13% upside from the current levels.
The brokerage said a combination of slowing smartphone demand, rising component costs and policy changes could weigh on near-term growth even as the company continues to expand its manufacturing footprint.
Here is a detailed analysis of the Jefferies investment rationale for Dixon.
Smartphone slowdown may affect near-term growth
Jefferies flagged a weaker global smartphone outlook as a major risk for Dixon’s core business. The brokerage cited estimates from its China technology team suggesting global smartphone shipments could fall 31% year-on-year in calendar year 2026. At the same time, memory costs, particularly DRAM used in smartphones, have surged sharply in recent quarters.
Higher component costs could push up handset prices and hurt affordability in the low- and mid-range smartphone segments, which could in turn affect order volumes for contract manufacturers such as Dixon.
Mobile business dominates Dixon’s revenue mix
The company’s mobile and EMS business accounts for roughly 90% of total sales, making it highly exposed to trends in the smartphone market, according to Jefferies.
Dixon produced around 30 million smartphone units in FY25, and the brokerage expects volumes to remain broadly flat in FY26 before picking up again with new client ramp-ups. Over the longer term, the company’s share in India’s outsourced smartphone manufacturing market could increase from around 30% in FY25 to about 50% by FY27, the report said.
Policy shift after mobile PLI expiry
Another factor weighing on the outlook is the upcoming expiry of the government’s production-linked incentive (PLI) scheme for mobile manufacturing.
Budget allocations for the scheme have already been sharply reduced for FY27, while support for electronic component manufacturing has increased. Jefferies said this shift could favour component suppliers over assembly-focused players such as Dixon in the near term.
Other business segments showing limited momentum
Consumer electronics and appliances, which were a few of Dixon’s legacy segments, now account for a much smaller share of the company’s revenue, and sales in the consumer electronics segment have declined in several recent quarters. For instance, television production volumes have fallen in recent years as the company lost market share in the category.
Approvals and partnerships still pending
The brokerage noted that some of Dixon’s expansion plans depend on regulatory approvals. While the company has received approval under the Electronic Components Manufacturing Scheme (ECMS) for camera modules, approvals for other initiatives, such as display modules and certain joint ventures with Chinese partners, are still pending.
Valuation remains relatively expensive
Despite the recent correction, Dixon continues to trade at around 47 times FY27 estimated earnings, which is higher than many peers in the electronics manufacturing sector. Jefferies said its price target is based on a valuation multiple that is already at a discount to the company’s historical trading average, reflecting concerns over slowing growth and execution risks.
Long-term growth prospects remain intact
Over the longer term, however, Jefferies still expects strong expansion for the company. The brokerage forecasts revenue and profit to grow at a compound annual rate of about 27% and 39%, respectively, between FY25 and FY28, supported by new client additions, expansion into electronic components and continued growth in India’s electronics manufacturing ecosystem.
Conclusion
For now, though, Jefferies believes investors may need to temper expectations as the company navigates a softer demand environment and policy changes in its key business segments. However, another international brokerage house, Nomura has a ‘Buy’ on Dixon Technologies. They see as much as 50% upside from current levels.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.