Shares of Dixon Technologies has turned multi-bagger, more than doubling investor wealth in 2020 despite concerns on the economy amid the COVID-19 pandemic and weak June quarter results. The stock had surged nearly 160 percent in 2020 on a year-to-date basis, rising from Rs 3,800 per share near 2019 end to over Rs 9,800 currently.

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The smallcap firm has also zoomed nearly 290 percent in the last year.

The company commenced manufacturing consumer electronics such as colour TVs in 1994. Over time, it has diversified into manufacturing LED

TVs, LED lighting products, security systems, set-top boxes and washing machines. It also started producing mobiles through a JV in 2016. Since 2008, Dixon has also started offering reverse logistics services, which entail repair and refurbishment of mobile phones, LED TVs, LED panels, etc.

For the June quarter, the company's consolidated net profit slumped 93 percent to Rs 1.60 crore and the revenue from operations witnessed a 55 percent decline to Rs 516.94 crore on a YoY basis.

EBITDA also fell 68 percent to Rs 17.10 crore in Q1 from Rs 53.15 crore in the year-ago period and the EBITDA margin was at 3.3 percent as on 30 June 2020 versus 4.6 percent on 30 June 2019.

Despite the weak numbers and demand crunch, the stock hit a fresh record high of Rs 10,280.70 per share on BSE earlier this week. It is up as much as 313 percent from its 52-week low hit on September 20 last year.

The stock seems to have gathered a large amount of interest from retail investors. As per BSE data, even foreign portfolio investors (FPIs) raised their stake to 14 lakh shares in Q1 versus 12.4 lakh shares held in the March quarter.

FPI stake in the company stood at 12.27 percent at the end of the June quarter against 10.76 percent in the previous quarter.

Brokerages have also given a thumbs-up to the stock. According to IIFL Securities, significant accretion in new business volumes along with macro tailwinds improves the FY21-22 outlook on Dixon’s core business.

"While the government's decision on the performance-linked incentive (PLI) scheme for mobile phones is expected anytime soon, Dixon will fund core and Mobile PLI CAPEX through internal accrual and term loan, thereby

dismissing concerns about equity dilution in the near term," it added.

Import restrictions on LED TVs, earlier in July 2020, and significant

delays (or inaction) thereafter, in approving licenses for imports to

top domestic brands have substantially increased manufacturing

volumes for domestic players like Dixon further noted the brokerage.

Meanwhile, Emkay also believes that over the last two years, Dixon has been able to attract big brands across the key product categories. The increasing scale of operations and a strong customer base augur well to gain a higher wallet share. It added that Manufacturing under the PLI scheme will be the game-changer for Dixon where it has already signed an MoU with a big brand and expects to increase capacity in Mobile phones to 45 million units, which will be 30 percent of the domestic requirement.

First Published:Sept 18, 2020 12:45 PM IST