CLSA Bets On Dixon Tech’s New Ventures, Regulatory Support — Check Target Price
CLSA take is that Dixon's moves, coupled with robust market opportunities and regulatory support, will enable it to capture a larger share of the domestic smartphone market
CLSA has initiated coverage on Dixon Technologies with a "High Conviction Outperform" rating and a target price of Rs 15,800. This bullish outlook is driven by Dixon's efforts at boosting value addition in its smartphone segment, particularly through its foray into camera module and enclosure manufacturing.
CLSA's take is that Dixon's initiatives, coupled with robust market opportunities and regulatory support, will enable it to capture a large share of the domestic smartphone market and bring strong bottom-line growth.
Strategic Backward Integration in Smartphones
Dixon has announced a significant move to acquire a 51% stake in Q Tech India, a company with camera module capacity of 0.4 million units per month. This backward integration is crucial as camera modules represent a substantial portion of smartphone value.
Additionally, Dixon has agreed to enter into a joint venture with Chongqing Yuhai for enclosures, which are another vital component in smartphone manufacturing. CLSA estimates that these two initiatives alone could raise Dixon's value addition in smartphones from 15% to 17% to 45% to 55%.
This enhanced value addition, combined with potential margin improvements from rising external sales, reinforces CLSA's view that Dixon's market share in the domestic smartphone market will continue to grow.
Foray Into Component Ecosystem
Dixon has entered into a binding term sheet for the acquisition of a 51% shareholding in Q Tech India. Q Tech is among the top five camera module suppliers globally and the largest in India, producing 42-49 million units annually. Despite accumulated losses, Q Tech clocked revenue of Rs 2.6 billion in financial year 2025 with an EBITDA of Rs 1.6 billion (7.5% margin).
Dixon and Chongqing Yuhai Precision Manufacturing have agreed to form a JV (Dixon/Chongqing: 76/24), focusing on manufacturing precision parts and components for laptops, mobile phones, IoT devices and automotive applications. This will strengthen Dixon's position in the electronics manufacturing value chain.
Opportunity Size
CLSA estimates the India camera module market to be approximately 450 million units, with an average of three cameras per smartphone. Given an average cost of Rs 250 to 300 per camera, this pegs the market around $1.5-1.7 billion.
CLSA estimates a similar opportunity for smartphone enclosures as well, along with additional opportunities for laptops and other products. This vast market size provides substantial growth potential for Dixon's new ventures.
Regulatory Tailwinds and Financial Impact
The Q Tech acquisition is subject to regulatory clearance under Press Note 3, which is expected to receive faster approval. Similarly, the enclosures joint venture will also require Press Note 3 approval. Additionally, the entire investment is expected to qualify for incentives under the Electronics Components Manufacturing Scheme, pending necessary approvals.
Assuming a 7% margin on the camera module and enclosure business, the brokerage believes this would lead to an over Rs 10-billion capital infusion.
Twenty-one out of the 35 analysts tracking the company have a 'buy' rating on the stock, four recommend a 'hold' and 10 suggest a 'sell', according to Bloomberg data. The 12-month analysts' consensus target price on the stock is Rs 16,755, implying an upside of 5.9%.
