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October 2, 2022

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Multibagger Stocks: Buy or Sell? Multibagger stock running on ‘Make in India’ theme, down 46% from peak!


New Delhi: A direct beneficiary of India’s ‘Make in India’ and ‘Make for the world’ manufacturing push, multibagger midcap stock Dixon Technologies It has given excellent returns of over 650 per cent to investors in the last three years. The stock also touched an all-time high of Rs 6,243.60 on the NSE on October 19, the day Nifty was at its peak.

However, as investors worried about expensive valuations of the stock amid rising inflation affecting consumer spending, share prices of the Noida-based company, which makes electronics such as TVs and mobile phones, also declined.

Since then, Dixon’s stock is down 46 percent from its all-time high. However, analysts have been largely positive, given strong policy tailwinds (PLI plan), long-term potential of outsourcing manufacturing in India and rising consumer electronics demand.

According to data from Trendline, out of 19 analysts with coverage on Dixon, the consensus recommendation is a buy with an average target price of Rs 4,418 indicating a potential increase of around 31 percent.

Global brokerage Morgan Stanley, which recently downgraded the stock to underweight, said the market is ignoring a number of risks, including competition, margin and ROE contraction.

“After the PLI period (i.e., once the incentive scheme is closed), the cost competitiveness of EMS players will be tested, and adequate local component ecosystem development will play a significant part of the sustained manufacturing thrust in the country. The increase in ODM business poses a risk to margins,” it said in a note to customers.

Morgan Stanley has set a target price of Rs 2,634 on Dixon, which indicates a downside potential of up to 28 per cent.

Selling by FIIs is one of the reasons behind the poor performance of the electronic manufacturing services (EMS) player, amid a bearish outlook on growth and impact on margins due to inflationary constraints.

Market data shows foreign investors reduced their stake in Dixon to 16.39 per cent from 18.51 per cent in the March quarter.

Dixon is also a favorite of retail investors, who held 15.23 per cent stake in the company, as evidenced by the number of individual shareholders with less than Rs 2 lakh investment.

Domestic brokerage firm ICICI Securities cited three key triggers for the stock:

1) Dixon has a 3-4 percent market share in the Indian EMS industry, which is valued at $23.5 billion. ICICI Sec said there is an opportunity to expand and grow.

2) Domestic mobile production under the PLI scheme is estimated to grow 5 times to Rs 10.5 lakh crore by FY26. Dixon is seen as one of the main beneficiaries.

3) According to the brokerage, new segments such as electronics/IT products, telecom products and LED lights and AC components will drive future revenue growth for Dixon.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)


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