Dixon Tech shares will soar
There was a huge race to buy shares of Dixon Technologies in the stock market on Thursday. After the Indian government approved a major agreement between Chinese smartphone brand Vivo and Indian company Dixon, shares of Dixon jumped by a huge 7 percent to reach a record high of Rs 14,680. Along with this historic partnership, the government has also announced new schemes worth Rs 1.9 lakh crore to accelerate mobile and semiconductor manufacturing in the country. These two big decisions have breathed a new life into the stock market and the entire electronics sector.
Dixon and Vivo’s 51:49 partnership
Now in India, Vivo’s smartphones will be manufactured on a large scale by the indigenous company Dixon. This long pending proposal of Joint Venture has got the green signal from the government. Under the agreement, Dixon Technologies will hold 51 percent stake in the new entity, while Vivo will hold 49 percent shares. After this partnership, Dixon will now work as Original Equipment Manufacturer (OEM) for Vivo India. According to Dixon management, this new company can also do manufacturing work for other brands in the future. Market experts believe that with this approval a major hurdle in Dixon’s path has been removed, which will see unprecedented expansion in the company’s business.
Masterstroke of Rs 1.9 lakh crore
A very ambitious plan of the government is also working behind this entire boom. The Union Cabinet has approved India Semiconductor Mission (ISM) worth Rs 1.27 lakh crore and new Mobile Phone Manufacturing Scheme (MPMS) worth Rs 62,500 crore. In this scheme, which will run for the next five years, companies will be given direct financial benefits (incentives) of 2.25 to 5 percent for manufacturing components domestically, preparing indigenous designs and exporting mobiles. The government aims to increase the share of indigenous components used in smartphones from the current 24 percent to 40-45 percent. This entire scheme will generate mobile production worth Rs 39 lakh crore in the country and create about 6 lakh new direct jobs for the youth.
Profits will increase due to cheaper input costs
This time is proving to be profitable for Dixon in every respect. Recently, the Central Government has announced huge relaxation in custom duty on machines and parts used in electronic manufacturing. Being India’s largest contract manufacturing company in manufacturing smartphones and IT hardware, Dixon will benefit the most. Due to cheaper parts, the cost of the company will reduce and the margin per unit will improve, due to which the company may see a strong jump in profits in the future.
Should investors still invest money?
After this spectacular rise in the shares of Dixon, even the leading brokerage houses seem quite confident about the future of the company. Well-known brokerage firm Emkay has advised to ‘buy’ this share. Also, he has increased his target from Rs 13,477 to Rs 15,200. MK estimates that after the partnership with Vivo, Vivo’s production can reach 18 million units by financial year 2028.
Similarly, another brokerage firm Nomura has also given a target of Rs 13,813 while maintaining its ‘buy’ rating. Nomura estimates that if Dixon takes over 70 percent of Vivo’s production, its total annual mobile manufacturing capacity could exceed 60 million units in the coming years. With this, Dixon’s total share in India’s mobile manufacturing market will increase to 35 to 38 percent.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
