Dixon Technologies shares have received positive stance from brokerage Motilal Oswal. The brokerage sees up to 33% upside in the stock from the previous close of Rs 16,726.30. It has raised price target on the EMS services provider to Rs 22,300 against the previous target of Rs 22,100.
The brokerage is positive on the firm’s market leadership positioning, JVs with other players that ensure long term sustainability of volumes, backward integration and ability to scale up other segments.
“Dixon has first mover advantage against competition in terms of 19% volume market share in smartphone market in FY25 moving up to 40% by FY27-end, ability to address 30-35% BoM in next 1-2 years for mobile manufacturing and ability to benefit from export opportunities from key clients in future where competition lags behind Dixon,” said Motilal Oswal.
Here’s a look at four factors that kept Motilal Oswal bullish on the stock in the long term.
Backward integration
Dixon Technologies is making significant strides in backward integration to mitigate the impact of the phasing out of Production Linked Incentives (PLI) benefits by March 2026. Currently, PLI benefits contribute around 50-60 basis points to Dixon’s mobile segment margins. To counter the potential negative impact, Dixon is focusing on backward integration initiatives across various segments. The company is set to commence trial production of displays in collaboration with HKC from Q1 FY2027 and is also acquiring a 51% stake in Q-tech India for camera modules. These efforts aim to address 30-35% of the Bill of Materials (BoM) for a smartphone, with expected mid-teens EBITDA margins in displays and 7-9% in camera modules.
Tariff -insulated stock
Dixon Technologies is strategically positioning itself for exports amidst an evolving US import tariff landscape. Electronic exports are currently exempt from US tariffs under Section 232, which means Dixon is not directly affected by these tariffs. Among its clients, Motorola is poised to ramp up exports to the US, although the overall impact of US tariffs on Indian exports remains uncertain. Despite the challenges of relocating supply chains, Motorola’s significant market share gains in India make the country an important market. Dixon plans to expand exports to other countries through its network of joint ventures with Original Design Manufacturers (ODM) and mobile players.
Edge over rising competition
Dixon Technologies’ competitive edge in the mobile EMS market is underscored by its dominance in the Android value chain. While the Apple value chain is led by companies like Foxconn and Tata Electronics, Dixon holds a strong position among Android phone players, outpacing competitors such as DBG Technologies and Karbonn. Dixon benefits from an early mover advantage, offering better margins and a robust balance sheet. Its backward integration initiatives and partnerships with companies like HKC and Q-tech, along with the component PLI scheme, are expected to enhance margins further. The company’s joint ventures with larger OEMs and ODMs like Vivo and Longcheer also ensure long-term volume sustainability.
Acquisitions and JVs
Dixon Technologies continues to pursue acquisitions and joint ventures to bolster its backward integration strategy. The company is awaiting approval for a 74:26 joint venture with Chongqing Yuhai Precision Manufacturing for precision components. These initiatives aim to drive margin improvements by leveraging duty arbitrage and the component PLI scheme. Dixon targets increased volumes from in-house customers for displays, camera modules, and precision components, opening avenues for margin enhancement beyond the mobile PLI program. Ultimately, Dixon’s strategic focus on backward integration is expected to yield significant profitability benefits in the long term.