Shares of Dixon Technologies hit a new high following a 14 per cent rally to Rs 4,588 on the BSE in intra-day trade on Thursday after the stock turned ex-stock split in the ratio of 1:5 i.e. from Rs 10 to Rs 2. The stock of the consumer electronics company surpassed its previous high of Rs 4,300 (adjusted to stock split) on March 15, 2021.
The company fixed March 19 as the record date for a stock split. Its board of directors, at their meeting held on February 2, had approved the stock split. Generally, a company plans to go for a stock split to make the shares more affordable for small retail investors and increase liquidity.
Dixon Technologies said the rationale behind the split is to encourage wider participation of small investors and to enhance the liquidity of the equity shares in the stock market.
Since February 2, the scrip of Dixon Technologies has rallied 51 per cent as compared to a 3.3 per cent rise in the S&P BSE Sensex. The stock has zoomed 691 per cent from its 52-week low of Rs 580 touched on March 24, 2020.
Led by the strong scale-up opportunities across multiple product categories, analysts at Nirmal Bang Securities expect a 55 per cent earnings CAGR for Dixon over FY20-FY23E. Robust growth prospects, healthy return ratios, lean working capital cycle and high fixed-asset turnover will support Dixon’s valuation, the brokerage firm said in the December quarter results update.
The growth outlook for the firm over the next few years remains robust, led by mobile phone performance-linked incentive (PLI) revenue booking from 4QFY21 (with Motorola and Nokia as clients), value and volume growth in LED TV, international business opportunities in lighting, foray into new verticals (fully automatic top-load washing machine, set-top boxes, medical electronics, wearables) and further diversification prospects through upcoming PLI schemes (IT products like laptops and tablets), the brokerage further added.
It noted that While the Ebitda margin profile will decline due to the rising share of mobile PLI and LED TV business (FY22E margin guided in 4.5 per cent-4.7 per cent range), robust growth in value terms will adequately compensate it.
At 09:47 am, the stock was trading 8 per cent higher at Rs 4,355 on the BSE as against a 0.85 per cent rise in the S&P BSE Sensex. A combined around 300,000 equity shares had changed hands on the counter on the NSE and BSE so far.