Dixon Tech: CLSA Cuts Target Price On Near-Term Headwinds — Weak Q3 On The Horizon?

Shares of Dixon Technologies will be in focus heading into Tuesday's trade after a fresh report from CLSA, which has cut the target price on the counter quite substantially, citing near-term weakness.

In its latest report, CLSA highlighted that while there is a medium-term recovery on the cards for Dixon Tech, the company could face short-term pressure in the wake of revenues flattening out.

Indeed, the brokerage firm expects Dixon Tech to register flat revenue growth on a year-on-year basis in the third quarter of FY26. On a quarter-on-quarter basis, the revenues are likely to see a decline.

CLSA has further cut FY26-27 earnings per share by 16% and 17% on account of lower volumes and margin delay, adding that FY26 guidance cut risk is also emerging due to these near-term headwinds.

CLSA remains bullish on Dixon Tech from a long-term perspective, though. The brokerage firm has kept FY28 EPS estimates unchanged, stating that recovery is expected over time.

A key factor that may aid the recovery is margin improvement through backward integration, especially in the smartphone division - a key driver of revenue.

Keeping these factors in mind, CLSA has maintained an 'overweight' rating on the counter, stating how medium-term recovery visibility will aid the company's prospects going forward.

However, CLSA has reduced the target price significantly from Rs 18,800 to Rs 15,880. The revised target price for Dixon Tech signals a potential upside of 34%, which is quite favourable for a stock that has witnessed major drawdown on a year-to-date basis.

EMS stocks, in general, have been under pressure this year amid near-term headwinds, geopolitical pressure and in some cases, delay in government grants. All of these factors have dampened sentiment in the sector, though analysts remain bullish on the space from a long-term perspective.