Latest news with #Karbonn
Mint
6 hours ago
- Business
- Mint
Phillip Capital flags growth risks for Dixon Tech amid rising competition; lowers target price to ₹9085
Dixon Technologies share price in focus: Shares of Dixon Technologies tumbled 2.5% in Wednesday's trade (June 25), falling to ₹ 14,585 apiece, even as the broader Indian stock market traded in positive territory. This drop in one of the country's leading EMS (Electronics Manufacturing Services) companies came after global brokerage firm Phillip Capital downgraded its estimates for Dixon, citing rising competition in the mobile phone assembly space. According to the brokerage, Dixon's largest client, Motorola, has started outsourcing domestic volumes to Karbonn, which currently accounts for 25% of Motorola's monthly volume, a figure expected to rise to 35% by June. As part of its diversification strategy, Motorola has been actively expanding its supplier base. Motorola contributes approximately 40% of Dixon's mobile phone volumes but nearly 72% of its mobile phone revenues. Dixon had significantly benefited from Motorola's market share gains in the Indian smartphone market in CY24 compared to CY23. When Motorola was a smaller player in CY23, Dixon handled its entire manufacturing. As Motorola has achieved scale, it has started outsourcing some of its volumes to Karbonn to diversify its supply chain, said Phillip Capital. It is worth noting that Karbonn itself is a recipient of mobile phone PLI and, therefore, can be cost-competitive in the mobile phone assembly space. The brokerage noted the company's exports have ramped up in the last few months, but domestic volume gain by Karbonn means Dixon's YoY growth from Motorola will be capped at 15% at best. In addition to Motorola, Dixon's second-largest client, Longcheer, has also begun diversifying its supply chain. While Dixon's volumes from Longcheer have grown over the past year, the client outsourced a small portion (2%) to Karbonn in May CY25. Though currently modest, Phillip Capital believes this could scale up quickly, following a pattern similar to Motorola's shift. Motorola initially outsourced just 1–2% of its volumes to Karbonn in February CY25, which jumped to 30% by May. On a more positive note, Dixon and Vivo entered into a 51:49 joint venture (JV) for mobile phone manufacturing in December CY24. The JV, which is currently awaiting regulatory approval, is expected to begin contributing to Dixon's topline by FY27. Management anticipates that the JV will handle two-thirds of Vivo India's mobile phone volumes. Based on a proportional volume-to-value ratio, the JV could generate revenue of ₹ 160 billion at optimal utilization, with Dixon's share estimated at ₹ 80 billion. Phillip Capital has lowered its revenue, EBITDA, and PAT estimates for Dixon Technologies for FY27 by 4%, 6%, and 9%, respectively, to reflect the intensifying competition in the mobile phone assembly space. Dixon shares its PLI (Production Linked Incentive) benefits with its mobile phone clients, which is currently offset by favorable Net Working Capital (NWC) terms. However, once the mobile phone PLI scheme ends, the brokerage expects Dixon's NWC days to trend toward 35+, in line with peers—Foxconn's stood at 40+ in CY24—which could lead to a declining RoCE trajectory. Factoring this in, Phillip Capital has also revised its valuation multiple, cutting the PE multiple from 50x to 45x FY27 EPS of ₹ 202, resulting in a revised target price of ₹ 9,085, down from the earlier target of ₹ 11,077.
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Business Standard
7 hours ago
- Business
- Business Standard
Dixon Tech slips 3%; Phillip Capital raises competition concerns, cuts TP
Dixon Technologies shares slipped 2.8 per cent in trade on Wednesday, logging an intraday low at ₹1,4090 per share on BSE amid worries that the domestic business may face significant competition. Phillip Capital has reduced its revenue/Ebitda/PAT estimate for Dixon for FY27 by 4 per cent/ 6 per cent/ 9 per cent on account of higher competition in the mobile phone assembly space. Ebitda refers to Earnings before interest, tax, interest, depreciation and amortisation and PAT refers to profit after tax. Further, the brokerage has reduced its target price from ₹11,077 per share to ₹9,085. At 12:12 PM, Dixon Technologies share price was trading 2.31 per cent lower at ₹1,4167.45 per share on the BSE. In comparison, the BSE Sensex was up 0.68 per cent at 82,611.89. The company's market capitalisation stood at ₹85,652.42 crore. Its 52-week high was at ₹19,149.8 per share and 52-week low was at ₹10,61 per share. In one year, Dixon Technologies shares have gained 24 per cent as compared to Sensex's rise of 5 per cent. Why are worries suddenly arising from increased competition? Motorola (Dixon's largest client) diversifying supply chain: Dixon's largest client Motorola has begun outsourcing domestic volumes to Karbonn, noted Phillip Capital in its brokerage report. According to the report, the outsourcing was minimal in February and March CY25, but now has increased to 25 per cent of Motorola's monthly volume, in April-May. Initial estimates suggest this figure can rise to 35 per cent by June. The brokerage believes that the shift is not unexpected as Motorola's entire manufacturing was managed by Dixon when it was smaller in CY23 and now, Motorola wants to diversify its supply chain. Longcheer may also outsource to Karbonn: Phillip Capital fears that Dixon's second-largest client, Longcheer will also start largely outsourcing incremental volumes to Karbonn. It already, in May CY25, began outsourcing around 2 per cent share to Karbonn. While the number is currently modest, the brokerage fears it could scale up quickly in coming months – mirroring Motorola's recent trajectory. Motorola had also initially outsourced only a minimal amount around 1-2 per cent to Karbonn in February CY25, but ramped up significantly in following months, with 30 per cent of its May volumes going to Karbonn. Longcheer and Huaqin are two of the leading global ODMs (Original Design Manufacturers). Currently, Dixon manufactures Longcheer's phones, while Huaqin outsources to Bhagwati Products and the DBG Group. For Dixon, volumes from Longcheer have grown over the past Volume share shifting to Karbonn: Dixon manufactures for Motorola across domestic and international markets. However, in recent months, while Dixon ramped up exports, particularly for Motorola, increased domestic competition led to volume share shifting to Karbonn. For domestic business, Motorola depends on local manufacturing partners such as Dixon and Karbonn due to India's duty structure. However, the export scenario is different. Further, the political ties of Motorola's parent company Lenovo with China further complicate long-term manufacturing strategies. Motorola has an 80mn smartphone manufacturing base in Wuhan, primarily for exports. There is a shift in manufacturing to India from China, so the capacity utilisation of its Wuhan plant has dropped by 15-20 percentage points. Notably, Lenovo, Motorola's parent, is based in China, with the Communist Party of China (CPC) holding a 10 per cent stake in that company, and considering this political ownership, Phillip Capital believes the long-term trajectory of this shift remains uncertain.
Mint
9 hours ago
- Business
- Mint
Phillip Capital flags growth risks for Dixon Tech amid rising competition; lowers target price to ₹9085
Dixon Technologies share price in focus: Shares of Dixon Technologies tumbled 2.5% in Wednesday's trade (June 25), falling to ₹ 14,585 apiece, even as the broader Indian stock market traded in positive territory. This drop in one of the country's leading EMS (Electronics Manufacturing Services) companies came after global brokerage firm Phillip Capital downgraded its estimates for Dixon, citing rising competition in the mobile phone assembly space. According to the brokerage, Dixon's largest client, Motorola, has started outsourcing domestic volumes to Karbonn, which currently accounts for 25% of Motorola's monthly volume, a figure expected to rise to 35% by June. As part of its diversification strategy, Motorola has been actively expanding its supplier base. Motorola contributes approximately 40% of Dixon's mobile phone volumes but nearly 72% of its mobile phone revenues. Dixon had significantly benefited from Motorola's market share gains in the Indian smartphone market in CY24 compared to CY23. When Motorola was a smaller player in CY23, Dixon handled its entire manufacturing. As Motorola has achieved scale, it has started outsourcing some of its volumes to Karbonn to diversify its supply chain. It is worth noting that Karbonn itself is a recipient of mobile phone PLI and, therefore, can be cost-competitive in the mobile phone assembly space. The brokerage said the company's exports have ramped up in the last few months, but domestic volume gain by Karbonn means Dixon's YoY growth from Motorola will be capped at c.15% at best. In addition to Motorola, Dixon's second-largest client, Longcheer, has also begun diversifying its supply chain. While Dixon's volumes from Longcheer have grown over the past year, the client outsourced a small portion (2%) to Karbonn in May CY25. Though currently modest, Phillip Capital believes this could scale up quickly, following a pattern similar to Motorola's shift. Motorola initially outsourced just 1–2% of its volumes to Karbonn in February CY25, which jumped to 30% by May. On a more positive note, Dixon and Vivo entered into a 51:49 joint venture (JV) for mobile phone manufacturing in December CY24. The JV, which is currently awaiting regulatory approval, is expected to begin contributing to Dixon's topline by FY27. Management anticipates that the JV will handle two-thirds of Vivo India's mobile phone volumes. Based on a proportional volume-to-value ratio, the JV could generate revenue of ₹ 160 billion at optimal utilization, with Dixon's share estimated at ₹ 80 billion. Phillip Capital has lowered its revenue, EBITDA, and PAT estimates for Dixon Technologies for FY27 by 4%, 6%, and 9%, respectively, to reflect the intensifying competition in the mobile phone assembly space. Dixon shares its PLI (Production Linked Incentive) benefits with its mobile phone clients, which is currently offset by favorable Net Working Capital (NWC) terms. However, once the mobile phone PLI scheme ends, the brokerage expects Dixon's NWC days to trend toward 35+, in line with peers—Foxconn's stood at 40+ in CY24—which could lead to a declining RoCE trajectory. Factoring this in, Phillip Capital has also revised its valuation multiple, cutting the PE multiple from 50x to 45x FY27 EPS of ₹ 202, resulting in a revised target price of ₹ 9,085, down from the earlier target of ₹ 11,077. Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
