Dixon Tech shares fall over 2% as Nuvama cuts FY27 EPS by 7%: Here are two reasons

According to fresh market updates, Dixon Technologies (India) shares declined over 2% on September 22 as Nuvama slashed the firm's FY27 EPS by 7% on likely delay in Vivo joint venture and weak smartphone market.

The brokerage met the firm's management recently. Dixon-Vivo JV is now anticipated to operationalise sometime in Q3FY27 (versus October 26 earlier), stated Nuvama.

"We are cutting FY27E EPS by 7% on a likely delay in Vivo JV consolidation while raising FY28E EPS by 9% on faster scale-up in components. Maintain 'HOLD' with a Sep-27E target price of Rs 14,800 (from Rs 13,700) based on 50x Sep28E EPS. Dixon trades at 54x FY28E EPS," stated Nuvama in a note.

"After 11-12% YoY contraction in Q1FY27, the domestic smartphone market to clock another 15-20% YoY decrease in Q2, as elevated memory chip prices and consequent gain in smartphone prices hurt demand in the mid to low-end smartphone segment. Dixon's Q2FY27 smartphone volumes are projected at 9.4-9.5mn units, indicating 10-12% decline YoY, hence implying market share gain. Smartphone realisations are likely to climb 10-15% QoQ with stable margins (INR per unit), hence yielding a modest EBITDA expansion, in our estimate," further noted Nuvama.

At 1:35 pm on September 22, Dixon Tech shares were trading 2.4% softer at Rs 13,030 apiece.

Export realisations are becoming difficult, making management’s export volume and price-expansion targets harder to achieve, stated the brokerage.

Dixon is aiming at 1.5-2 crore export units, total smartphone volumes of 7-7.5 crore units annually and mobile phone topline of Rs 1.05-1.1 lakh crore with margins likely to improve through backward integration and MPMS incentives.

Dixon, as per Nuvama, stated telecom and IT hardware continued to gather further traction with FY27 topline anticipated at Rs 6,500–7,000 crore (40% YoY) and above Rs 6,000 crore (275% YoY), respectively.

Dixon maintained its FY27 volume guidance of 33 million units (ex-Vivo) while it anticipates exports to recover Q3FY27 onwards following MPMS scheme rollout and model approvals, further noted Nuvama.