Dixon Tech shares surge 7% on Rs 1.9 lakh crore phone manufacturing push. Buy, sell or hold the stock?

Shares of Dixon Technologies rallied as much as 7% to their day’s high of Rs 14,680 on the BSE on Thursday after the Union Cabinet approved the Rs 1.27 lakh crore second phase of the India Semiconductor Mission (ISM) and a new Rs 62,500 crore Mobile Phone Manufacturing Scheme (MPMS).

The government will release the administrative notification for both schemes within the next fortnight, electronics and information technology minister Ashwini Vaishnaw said.

“The government’s conditionalities for incentives are aligned with the industry’s perspective which focuses on building scale, making India globally competitive, and owning intellectual property,” said Atul Lall, managing director at Dixon Technologies, a key beneficiary of the earlier PLI scheme.

The scheme for mobile phones—billed as different from the production-linked programme that lapsed on March 31—will have a tenure of five years and disburse incentives based on domestic sourcing as well as design and R&D by Indian brands. The scheme will also offer incentives for export of smartphones.

Decoding MPMS

The scheme outlines incentives for eligible sales in the range of 2.25% to 5%. There is an additional incentive of 1.5% for domestic sourcing of key components and another 3% for building an Indian brand with its own design and R&D.

The government expects MPMS to help increase domestic value addition in smartphones to 40-45% by the end of the scheme from 24% now.

Also read: Vivo-Dixon deal approval reveals India’s new China playbook

It projects cumulative mobile-phone production of Rs 39 lakh crore and exports of Rs15 lakh crore during the scheme period, creating an estimated 600,000 new direct jobs.

The previous PLI scheme helped production reach Rs 22 lakh crore and exports over Rs 7.5 lakh crore, creating 1.2 million jobs.

The development comes just a week after the Centre expanded customs duty concessions on a range of machinery and components used in electronics manufacturing. Dixon Technologies, India’s largest domestic contract manufacturer of smartphones, IT hardware and television sets, is expected to benefit from lower input costs. The customs duty relief is likely to improve unit economics, support margins and aid the company’s continued expansion in its mobile and electronics manufacturing businesses.
Dixon-Vivo JV

Last week, Chinese smartphone brand Vivo Mobile India received the long-pending government approval to form a joint-venture partnership with Dixon for manufacturing of smartphones.

Both companies had signed a binding term sheet in December 2024 under which the electronics manufacturer will hold 51% of the share capital, while Vivo India will have 49% share.

The joint-venture entity will act as the original equipment manufacturer (OEM) of electronic devices including smartphones for Vivo Mobiles in India. The entity can also engage in manufacturing for other brands, Dixon said.

What are experts saying?

Emkay raised its target price to Rs 15,200 (11% upside) from Rs 13,477 while maintaining a Buy rating on the counter. The brokerage said regulatory approval for the 51:49 joint venture with Vivo removes a key overhang and paves the way for large-scale manufacturing of Vivo smartphones. It has raised its Vivo production estimates to 6.5 million units in FY27 and 18 million units in FY28, resulting in 14% and 17% upgrades to its FY27 and FY28 EPS estimates, respectively.

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Emkay noted that Dixon already accounts for 45-50% of India’s smartphone manufacturing capacity, with the Vivo JV expected to further strengthen its leadership. It also sees continued policy support for domestic electronics manufacturing, including the proposed Mobile PLI 2.0 scheme, as a key growth driver. The brokerage believes Dixon’s strong return ratios, negative working capital cycle and robust cash generation justify its premium valuation and remains positive on the stock.

Nomura has maintained its Buy rating on Dixon Technologies with a target price of Rs 13,813. It believes the regulatory approval for the joint venture improves volume visibility for Dixon, which currently accounts for around 18% of India’s mobile manufacturing with approximately 33 million units in FY26. Assuming Dixon secures around 70% of Vivo’s production, Nomura estimates its annual output could rise to nearly 60 million units over the next few years, translating into a 35-38% market share.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)