Kotak upgrades Dixon Technologies to 'Reduce,' raises target price to Rs 14,770

Dixon Technologies

Kotak Institutional Equities has upgraded Dixon Technologies Ltd to 'Reduce' from 'Sell' and raised its target price to Rs 14,770 per share, citing the company's bold but high-stakes entry into display fabrication.

Dixon is positioning itself as India’s first mover in display manufacturing, planning to set up a $2.7 billion display fab that will cater to 20-25 percent of India’s total demand and fully meet its internal requirements. However, the project hinges on securing a 75 percent capex subsidy under ISM 2.0 (50 percent from the central government and 25 percent from state governments).

Kotak expects the facility to achieve steady-state operations in four years, delivering 19 percent RoCE (factoring in the subsidy). Sustained government support and a guaranteed domestic market remain critical challenges for Dixon’s display business.

Kotak highlights that Dixon’s entry into display fabrication, supported by the ISM subsidy, can enable vertical integration across multiple product segments. However, the global display industry faces slow growth, frequent technological disruptions, and intense competition from Chinese players, making continued government subsidies and trade protections essential for domestic success.

Kotak values Dixon’s display fab business at Rs 1,540 per share, based on a 74 percent stake for Dixon, 26 percent for its technology partner, a three-year setup period, 0.7x asset turnover, a 20 percent stable-state EBITDA margin, and a 1.5 percent terminal growth rate. This raises Dixon’s overall valuation to Rs 14,770 per share, up from Rs 13,230. However, delays in ISM 2.0 implementation, lower-than-expected subsidies, or difficulty securing a strong technology partner pose major risks to the project.

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