Dixon Technologies Partners With Xiaomi For Manufacturing Smartphones; Stock Hits New 52-Week High

Consumer electronics manufacturer, Dixon Technologies (India)has touched a new 52-week high during Thursday's trade as investors cheered the company's strategic partnership with Xiaomi whose Redmi, POCO and Mi are some of the affordable and most popular smartphone brands in India. Dixon has been extending its gaining spree for the fourth consecutive day.

On BSE, Dixon touched a new 52-week high of Rs 5,379.85 apiece in the early trade, rising by at least 1.81% on the exchange.

In the previous session, Dixon's share price stood at Rs 5,284.20 apiece.

As per the regulatory filing, Dixon entered into an agreement with Xiaomi to carry out the manufacturing of smartphones and other related products for Xiaomi. The deal was inked through its wholly-owned subsidiary Padget Electronics.

The manufacturing shall take place at Padget's manufacturing facility situated in Noida.

On the development, Atul B. Lall, Vice Chairman & Managing Director, Dixon Technologies (India) Limited said "it gives us an immense pleasure to partner with Xiaomi which is an iconic brand. We are delighted and encouraged by the trust they have reposed on Dixon for the association and believe that this association will leverage our excellence, superior execution track record and Xiaomi's expertise & leadership in Indian business ecosystem and it represents a major milestone in Indian Governments "Make in India" initiative."

He added, "We see them as an ideal strategic partner who shares our core values: quality, engineering, prowess and customer satisfaction. We are confident this is just a beginning of a long and prolific relationship and there is immense potential to further build on shared capabilities to deliver sustainable growth."

Lall further stated that "Dixon's wholly owned subsidiary, Padget Electronics is one of the few Companies who have received PLI scheme approval from the Government of India (GOI)."

Dixon is the largest home-grown design-focused and solutions company engaged in manufacturing products in the consumer durables, lighting and mobile phones markets in India. Their diversified product portfolio includes (i) consumer electronics like LED TVs; (ii) home appliances like washing machines; (iii) lighting products like LED bulbs and tube lights, downlighters; (iv) mobile phones; and (v) CCTV & DVRs (vi) Medical Equipment (vii) wearables. Dixon also provides solutions in reverse logistics i.e. repair and refurbishment services of LED TV panels.

Companies manufacturing computers, hardware, laptops, and tablets among others have been in focus this week. Earlier, as per a Bloomberg report, India is loosening its planned restrictions on imports of laptops, tablets and other IT hardware, giving manufacturers such as Apple Inc., HP Inc. and Dell Technologies Inc. more time to prepare for potential curbs.

In its recent report dated September 21, Kotak Institutional Equities said, "Inherent differences between laptops/tablets and mobile phones would limit the pace of scale-up in the laptops/tablets business for Dixon-(1) weaker case for brands to outsource and (2) weaker incentive (beyond regulatory hurdles) to move manufacturing to India. The recent news flow, suggesting deferment/dilution of regulatory hurdles, may further impede the revenue scale-up for Dixon."

According to Kotak's note, the key push from the government front to localize the manufacturing of laptops/tablets is the imposition of restrictions on such imports, with brands requiring valid import licenses beyond October 2023. The recent news flow suggests that the Ministry of Electronics and Information Technology (MeitY) is considering options, including going in for an online registration of importers instead of the cumbersome licensing process. A dilution of regulatory restrictions may further dilute the pace of scale-up in related manufacturing in India and revenue scale-up in India.

On Dixon's valuation, Kotak said, "We build in Dixon breaching the US$ 1 bn revenue scale over the next five years in laptops/tablets (US$4 bn revenue scale in mobiles) against the current $4 billion-related imports from China in FY2023. We value Dixon at Rs4,000, factoring in (1) a ~35% market share in the mobile phone and laptop/tablet segment over time, (2) 20% share of exports over time and (3) components contributing 15% boost to the EMS value."

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.