International brokerage house Nomura has retained its ‘Buy’ rating on Dixon Technologies (India) with a revised target price of Rs 13,813, down from Rs 14,678 earlier. At the stock’s closing price of Rs 10,138 on May 12, the target implies an upside of about 36%.
The brokerage trimmed its estimates after Dixon’s fourth-quarter FY26 results, citing delays in the Vivo joint venture approval and a softer near-term demand outlook for smartphones.
Here is a detailed analysis of Nomura‘s investment rationale for Dixon:
Q4FY26 results largely in line
Dixon reported consolidated revenue of Rs 10,510 crore for the March quarter, up roughly 2% year-on-year. EBITDA margin came in at 3.9%, leading to EBITDA of Rs 41 crore, which was down 8% year-on-year but within striking distance of estimates, as per the report.
Reported PAT (Dixon’s share) stood at Rs 250 crore. Adjusted PAT at Rs 180 crore was flat year-on-year. The company generated free cash flow of Rs 720 crore in FY26 and ended the year with net cash of Rs 770 crore.
Segment-wise, the Mobile and EMS segment posted revenue growth of 4% year-on-year, with weaker mobile revenues offset by higher IT hardware and components contribution. EBIT margin for the segment stood at 3.6%. Home appliances and consumer electronics revenues grew 8% and 1% year-on-year, respectively, with margins at 9.4% and 5.7%.
Mobile business: flat volumes but higher realisations expected
According to the report, smartphone demand remained soft over the last several quarters, primarily on account of rising memory prices pushing up handset average selling prices. The company, however, clarified that there are no supply-chain challenges impacting production.
FY26 smartphone volumes came in at approximately 33 million units, including exports. For FY27, management expects domestic mobile volumes to remain broadly flat without the Vivo contribution, but total mobile revenues are still expected to grow meaningfully, driven by double-digit volume growth in key quarters and pricing growth of 12–15%.
Nomura has cut its FY27 and FY28 mobile volume estimates to 45 million and 55 million units, respectively, down from 55 million and 63 million earlier. These numbers include exports and an assumed Vivo contribution of 12 million and 17 million units in the respective years. The company’s own FY27 revenue target, excluding Vivo, stands at approximately Rs 560 billion, implying 15–17% growth even without that upside, the report stated.
Vivo JV approval remains the key swing factor
The government’s approval for Dixon’s joint venture with Vivo remains pending and is arguably the single biggest near-term catalyst for the stock, according to the report. The company has reiterated that discussions are at an advanced stage and remains confident of a closure.
As per Nomura, if approved, Vivo could potentially add 20–22 million smartphone units annually, which would materially increase Dixon’s scale in mobile EMS. Nomura also noted that the Vivo approval could impact FY28 EPS by approximately 20% if it does not come through.
Feature phone exports are expected to ramp up gradually, with Africa identified as the key initial market, and volumes could go up to 50 million units over time. FY26 export volumes stood at approximately 4–4.5 million units, with export revenues of Rs 5,380 crore.
IT hardware and telecom: the next growth engines
Nomura’s conviction in the Buy call rests substantially on the diversification underway beyond mobile. IT hardware revenue for FY27 is targeted at over Rs 40 billion, roughly double the FY26 run rate, driven by laptops, desktops, tablets, and the Inventec joint venture, which is expected to ramp up from the third quarter of FY27, as per the report.
The telecom business has scaled rapidly, from Rs 700 crore in FY24 to approximately Rs 5,000 crore in FY26, with a target of Rs 7,500–8,000 crore in FY27. Manufacturing of high-complexity telecom radios and microwave radios has already commenced, and exports are expected to begin in FY27. According to Nomura, telecom and IT hardware are potentially replicating the scaling trajectory earlier seen in the mobile EMS business.
Component manufacturing: Margin story FY28 onwards
Display module construction is complete, machinery installation is ongoing, and trial production is expected to begin in the third quarter of FY27, with commercial production from the fourth quarter of FY27, as per the report. Phase-1 capacity covers 24 million mobile displays annually and 2.4 million automotive and IT displays, with the plan to scale mobile display capacity to 50–55 million units over two years. At 80–90% utilization, management sees display business revenue potential of Rs 5,500–6,000 crore with double-digit to mid-teen margins over time, the report added.
Camera module capacity is being expanded aggressively from approximately 70–80 million units to 180–190 million units over the next 15–18 months. SSD manufacturing is set to start from the second quarter of FY27. According to Nomura, the larger benefits from this backward integration are likely to flow from FY28 onward.
Margin pressure near-term, PLI phase-out a headwind
According to the report, the expiry of the production-linked incentive (PLI) scheme for mobile manufacturing is expected to create near-term margin pressure of approximately 50–70 basis points over FY27. Budget allocations under the scheme have already been sharply reduced for FY27.
As per Nomura, the company expects operational efficiencies and the ramp-up of camera and display modules to partially offset the PLI impact. Nomura has cut its FY27 and FY28 EBITDA margins by 53 basis points and 35 basis points to 3.3% and 4.2%, respectively, leading to EBITDA cuts of 15% and 5% and EPS cuts of 21% and 8% for the two years.
Key risks ahead
As per the report, the key risk remains the Vivo JV approval. Beyond that, Nomura stated that dependence on a few large customers, the possibility that new customer additions in IT hardware and other segments could be slower than expected, potential for sharp government-mandated wage increases to hurt margins, and the risk that the PLI scheme is not extended beyond FY27.
Dixon Technologies share price
Dixon Technologies’s stock was nearly flat during intraday trading on May 15 and it has declined 33.04% in the past year.
Disclaimer: The investment rationale and target price mentioned are based on a specific brokerage report and do not constitute a buy, sell, or hold recommendation by this publication. Investing in equities involves substantial risk; please consult a SEBI-registered investment advisor before making any financial decisions based on these projections.
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