Dixon Technologies Ltd. surged up to 3% in trade on Tuesday on the back of news reports of the government closing in on approving its joint venture with smartphone brand Vivo, with NDTV Profit confirming that an inter-ministerial committee giving the nod after a meeting on Saturday.
Although the government is yet to confirm the Vivo JV, there is much excitement around Dixon Tech, with JPMorgan identifying the stock as its top pick in the EMS sector.
In its latest note, JPMorgan has maintained an ‘overweight’ rating on DIxon Tech with an unchanged target price of Rs 12,700. The brokerage sees a large upside coming to Dixon Tech once the Vivo JV gets approved by the government, nullifying the notion that the development is already priced in.
JPMorgan expects the operations to start after 60-90 days in the third quarter of FY27, once the JV gets approved and assumes it could contribute 11 million to mobile volumes for Dixon Tech in FY27 and 22 million in FY28.
This could drive a 24-39% upgrade to revenue estimates during this period and a 13-18% EPS upgrade, thus taking fair value to Rs 15,100 and accounting for an upside of 23%. Although JPMorgan’s current target price suggests flat returns, there is likely a case for re-rating once the Vivo JV gets officiated.
Overall, the firm sees two key catalysts for Dixon Tech in the short-term – the Vivo JV approval and the announcement of a PLI 2.0 scheme. Both the events could serve as a significant boost to the company’s revenue opportunities.
ALSO READ: Dixon Tech Set For Rs 30,000 Crore Boost As Govt Likely To Approve Vivo JV
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