Dixon To Benefit From Restrictions Put On Laptop Import, Says Jefferies

This is another step for pushing indigenisation, as the government is focusing on increasing local manufacturing, Jefferies said. (Source: Company website)

Dixon Technologies (India) Ltd. will benefit from the Indian government's restriction on imports of laptops, tablets, personal computers, and ultra-small computers and servers, according to Jefferies.

This is another step towards pushing indigenisation, as the government is focusing on increasing local manufacturing, strengthening the domestic valuation chain, and enhancing value addition since 2020, the brokerage said in an Aug. 3 note.

In August 2020, the government restricted imports of LED televisions in India as they met 30% of industry demand. Dixon had the largest domestic capacity for manufacturing LED TVs and benefited from this step, Jefferies said.

The government launched the Performance Linked Incentive Scheme 2.0 for IT hardware in May, 2023. Under this scheme, incentives will be given for six years. Dixon's management has said that it is evaluating whether to participate in the scheme.

Dixon has been a recipient of the initial PLI in IT hardware (2021) and manufactures many of these items, the brokerage said.

Currently, the company's IT hardware business is less than 5% of its topline. The Q1 FY24 sales stood at Rs 86 crore, thanks to anchor customers of Acer. Jefferies expects sales to grow over 3 times over FY23-26 on a lower base.

Has a 'hold' rating with a target price of Rs 4,300 per share.
Expects a strong FY23-26 sales/PAT CAGR of 27%/45%, aided by PLI ramp up, new customers, and category adds.
Key risks include demand slowdowns, market share losses for key customers, and supply chain issues.

Shares of the company rose 6.95% to Rs 4752.05 apiece, compared to a 0.43% rise in the benchmark NSE Nifty 50 at 10:34 a.m. on Friday.