Amber Enterprises Vs Dixon Technologies: Here's What Jefferies Prefers And Why
The brokerage has a ‘buy’ rating for Amber Enterprises, while it maintains a ‘hold’ for Dixon Technologies.
Amber Enterprises India Ltd. is preferred pick over Dixon Technologies (India) Ltd. for Jefferies, despite both showing strong growth momentum with their diverse business models.
The brokerage has a ‘buy’ rating for Amber Enterprises, while it maintains a ‘hold’ for Dixon Technologies citing its high valuations.
Jeffereis set a target price of Rs 3,740 per share for Amber Enterprises, implying an upside of 26%; while expects Dixon's stock to rise to Rs 5,050 apiece, a potential upside of 5%.
Both Dixon and Amber are estimated to yield strong earnings per share at a CAGR of 40–45% over FY23–26, Jefferies said in a Sept. 25 note. “Our target PEs for Dixon and Amber are 47 times and 33 times, respectively, in line with historic trading averages.”
Business Models
Amber Enterprises will yield higher margins due to backward integration, led by faster growth in components, capex commissioning, client addition, and PLI upside, according to Jefferies.
However, the brokerage expects strong sales for Dixon Technology from its wider product slate, aided by the production-linked incentive scheme ramp-up, new customers, and category additions. “We estimate Dixon's mobile sales to grow at over 27% CAGR over FY23 to FY26, led by key customers such as Samsung, Motorola, Nokia, ITEL, and Jio.”
Dixon has applied under the 'hybrid' category in the recent IT Hardware Production Linked Incentive Scheme 2.0 launched by the government.
Jefferies On Amber Enterprises
Secular industry prospects, with under-penetration in the refrigeration and air conditioning segments.
Outsourcing opportunity from the import ban on ACs in India
Backward integration reduces dependence on imports.
Ramp-up in acquisitions to drive component growth.
Robust growth prospects.
Jefferies On Dixon Technologies:
To benefit from the play on indigenisation.
There is a notable industry opportunity in the electronic manufacturing services market.
Expansive product mix with upside from PLI scheme in mobiles.
A sharp premium to valuations of Taiwanese EMS players.
EMS players' order book is influenced by the sales budgeting of branded players, which warrants caution amid present demand weakness.
Shares of Amber Enterprises closed 1.01% higher at Rs 2,996.15 apiece, while those of Dixon Technologies gained 4.27% to end at 5,098.15 per share on Tuesday. That compares to an almost unchanged Nifty 50.