The government’s boost for the indigenization of goods seems to come as a boon for companies such as Dixon Technologies, as witnessed in its stock price.

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The stock price of Dixon Technologies, the largest Electronic Manufacturing Services (EMS) player in India, has risen more than 200 percent in last one year.

Market participants believe Dixon Technologies is well-poised to capitalize the opportunity from the outsourcing demand driven by the “Make in India” cause and expect strong revenue growth for the company going ahead.

In April 2020, the government launched the Production Linked Incentive (PLI) scheme for mobile phones/electronics, which provides incentives of up to Rs 41,000 crore over the next five years.

Last week, the company announced that it's Wholly Owned Subsidiary Padget Electronics Private Ltd received approval from the government’s PLI scheme for the manufacturing of Mobile Phones. Under the scheme, the company will get an incentive of 4% to 6% on incremental sales (over a base year) of goods manufactured in the country.

Global brokerage Jefferies estimates around 8x sales growth in mobiles over FY21-23e, with +40 bps margin expansion. It projects Dixon's mobiles sales/EBITDA contribution to rise from 12%/9% in FY20 to 44%/31% by FY23e.

The company’s robust balance sheet is characterized by net cash, optimum working capital, high return ratios, good cash flows and a sizeable cash pile.

The company has a diversified product portfolio across Consumer Electronics (48% of FY20 revenue mix), Lighting Solutions (26%), Home Appliances (9%), Mobile Phones (12%), Security Surveillance Systems (5%) and Reverse Logistics (<1%).

“Dixon’s focus on margin-accretive ODM sales (34% now) could be a key positive. Dixon has been expanding capacities over the past few years and is well-poised to capitalize on this notable industry opportunity. The recent notification in Aug'20 to curb imports on colour / LED TVs could augur well for local manufacturing,” Jefferies said.

Over FY20-23e, the brokerage estimates Dixon's sales/PAT to register +33%/41% CAGR, aided by sturdy industry opportunity, upside from Govt PLI scheme (mobile segment), new launches and client expansion into multiple end-user segments and higher ODM share (34% of sales now).

Jefferies initiated coverage on the stock with a Buy rating and a Target Price of Rs 12,600 per share.

At 12:55 pm, the shares of Dixon Technologies were trading 3.62 percent higher at Rs 9,360.00 apiece on the BSE.