Dixon Tech Shares Surge Following Key Development — Details Inside

Shares of Dixon Tech are surging in trade on Tuesday after the company received approval from the government to form a joint venture with HKC Overseas Ltd. The approval was long overdue and was serving as one of the long-awaited headwinds. 

The stock is currently trading at Rs 10,207, accounting for gains of more than 4%. The shares have come off the day's high of Rs 10,530. In the last six months, the stock had fallen as much as 40%.

The rally in Dixon Tech on Tuesday, as mentioned earlier, comes on the back of the government's approval for the HKC Overseas Joint Venture, coming almost a year after the company executed a share subscription and shareholders' agreement with the firm.

Dixon's partnership with HKC is for manufacturing display modules, with the former set to hold a 74% stake in the JV. As part of the agreement, the EMS firm will develop, manufacture and distribute liquid crystal modules as well as other products such as thin film transisor LCD modules.

As part of the JV, Dixon, in the first phase, is creating a capacity of 24 million per annum for smartphones, with another 2 million units per annum scheduled for notebooks. Largely captive consumption and automotive combined and trial should commence by Q2FY27. In the second phase, Dixon will enhance its capacity to 55 million units per annum.

Following the development, Nomura has released a note on the counter, reiterating a 'buy' rating on the counter with a target price of Rs 14,678. Jefferies, though, maintained a 'hold' call, citing headwinds surrounding the DRAM price surge and the Vivo deal, which is yet to be approved. The brokerage firm also cited a higher valuation compared to its peers.

ALSO READ: Dixon Tech Valuation Still Higher, Says Jefferies Despite 60% Fall — Check Target Price

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