The share price of Dixon Technologies, an electronics manufacturing services (EMS) company, fell over 3 percent in early trade on Thursday, after the company reported its first-quarter earnings with a weak set of numbers on a sequential basis owing to a slowdown in the industry on supply chain issues.

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The stock was trading over 2 percent lower at Rs 3,607 per share at the time of writing. The stock has fallen 16.05 percent over the last 6 months and 18.42 percent over the last 12 months.

The consumer electronics company's stock had also come under pressure in the last few months due to concerns over impact of Enforcement Directorate's (ED) seizure of assets of Chinese mobile manufacturing company Xiaomi and a sharp increase in the raw material costs.

Source: Value Research

Dixon Technologies on Wednesday reported its first-quarter earnings with a 27 percent decline in net profit on a quarter-on-quarter (QoQ) basis to Rs 45.70 crore from Rs 62.97 crore.

Its total income fell 3 percent to Rs 2,855 crore against Rs 2,954 crore in last quarter while EPS fell 28 percent to Rs 7.58 from Rs 10.61.

On a year-on-year basis, the numbers were strong with a 152 percent increase in the net profit, a 53 percent rise in net sales and a 152 percent rise in EPS.

The EBITDA — earnings before interest, taxes, depreciation, and amortization — stood at Rs 100.54 crore in the June quarter, up 108.29 percent from Rs 48.27 crore last year.

However, the worst is not over for the company yet as slowdown in the business continues with the volume guidance for TV segment cut to 3.6 million from 4 million.

“Initially we were targeting around 4-4.2 million. Now we are feeling that we should be somewhere around 3.5-3.6 million. In television segment, globally one has seen a significant slowdown; even the biggest of global brands have seen slowdown and same is the situation in India," said Atul Lall, MD, Dixon Technologies in an interview with CNBC-TV18.

"The volumes picked up a bit but we were not able to come up to our budgeted numbers. The order book in the current quarter looks good because they are building up for the festive season," he said.

The company said that the revenue growth for the financial year 2023 is now seen at 7-10 percent, lower than earlier projection, due to slowdown in television space. EBITDA margin for the year is seen at 4-4.5 percent, better than last year, as cooling commodity prices will lower freight costs.

Morgan Stanley has an 'Underweight' call on Dixon with a target price of Rs 2,634 per share. It expects more downside risk to earnings going forward. While, Credit Suisse has an 'Outperform' call with a target price of Rs 4,500 per share. According to CS, results were lower than expected due to inventory loss from falling commodity prices.

Lall said that in other verticals, he doesn't see a correction taking place.

"We are a PLI ( Production Linked Incentive) beneficiary across 5 segments. For mobiles, we are in advance stages of discussions with two large global brands, we are hopeful that we will be able to get a breakthrough in addition to our existing anchor brand Motorola. We are also a beneficiary in the IT segment, wherein we manufacture the IT products, namely the laptops for Acer. We are in discussion with a large global brand for manufacturing of tablets and motherboards of notebooks," he said.

The company is also a beneficiary of PLI scheme in telecom, AC and lighting components for which investments are being made.

Overall, as a percentage, Lall said it is going to be an aggressive growth not only in FY23 but also in the next financial year.