Dixon Technologies shares may correct another 5-10%, says Chola's Dharmesh Kant

Dixon Technologies' stock could see another 5% to 10% correction as margin pressures and negative operating cash flows weigh on its near-term outlook, according to Dharmesh Kant Head-Research at Chola Securities.

“We did have a play on Dixon Tech. It was more of a tactical trading play in anticipation of Vivo JV. The way the management sounded in the concall was a bit of a pressure coming into the margin side, and it's likely to stay for next couple of quarters,” he said.

He believes Dixon's current valuation leaves limited room for upside and the price-to-earnings multiple could contract from the current 42-48 times range to around 35-40 times.

The company could find it difficult to sustain growth in mobile manufacturing, while its washing machine, refrigeration and other electronics component businesses may also face margin pressure.

The benefits from Vivo-related business could become more visible only in FY28.

He also flagged concerns over cash flows, which turned negative during the quarter. The expected government payment of around ₹1,000 crore is another factor investors will need to monitor, as the timing of the actual receipt remains uncertain.

Kant remains cautious on Muthoot Finance despite the sharp correction in its share price. The stock has already declined around 40% from its peak, but he believes asset quality concerns could continue to weigh on the business.

He pointed to stress in parts of southern India, particularly Telangana, Andhra Pradesh and Karnataka, where drought conditions have affected borrowers. Since gold loans are often taken by customers from lower-income groups, any difficulty in repayments could have a wider impact on collections.

According to Kant, early signs of repayment stress are already visible at the ground level. Falling gold prices could add to the pressure, affecting loan-to-value (LTV) ratios and creating additional challenges for lenders.

He expects the next two quarters to be difficult for gold financing companies, including Muthoot Finance and Manappuram Finance, with collections emerging as a key concern.

The change in repayment requirements following regulatory changes could also affect borrower behaviour. Customers who were earlier accustomed to repaying loans through bullet payments may now have to make more regular interest payments, which could put additional pressure on collections.

Kant believes investors should closely track management commentary on asset quality and collection trends in the coming quarters.

For the entire discussion, watch the accompanying video

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