In the recent turn of events, Shares of Dixon technologies hit a new high following a 14% rally to 4,558 on the BSE in intra-day trade after the stock turned ex-stock split in the ratio of 1:5, i.e., from INR 10 to INR 2. The stock of the consumer electronics company surpassed its previous high of INR 4,300 (adjusted to stock split) on March 15, 2021.
The company fixed March 19 as the record date for a stock split. The board o directors, at their meeting held on February 2, 2021, had approved the stock split.
But in general, 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 railed 51% as compared to a 3.3% rise in the S&P BSE Sensex. The stock has zoomed 691% from its 52% week low of INR 580 touched on March 24, 2020.
Led by the strong scale-up opportunities across multiple product categories, analysts as Nirmal Bang Securities expect a 55% earnings CAGR for Dixon, over the Financial year 2020-23E. Robust growth prospects, healthy return ratios, lean working capital cycle, and high fixed-asset turnover will support Dixon’s valuation, the brokerage firm said that in the December quarter results update.
The growth outlook for the firm over the next few years remain 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, and 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 percent to 4.7 percent range), robust growth in value terms will adequately compensate it.
At around 09:47 AM, the stock was trading 8% higher at INR 4,355 on the BSE as against a 0.85 percent 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.