Credit Suisse Bets On These Two Consumer Durable Stocks Despite Run-Up
Dixon Technologies Ltd. facility for designing, manufacturing and testing of a wide range of washing machines. Revenue from this segment is completely based on Original Design Manufacturing (ODM) model. (image: Company website)

Credit Suisse Bets On These Two Consumer Durable Stocks Despite Run-Up

Shares of Dixon Technologies (India) Ltd. and Amber Enterprises India Ltd. have scaled all-time highs, recovering from their 52-week lows. Yet, Credit Suisse bets on a further upside for the stocks as the research firm initiates coverage on the contract manufacturers for consumer durable makers with an ‘outperform’ rating.

Dixon Technologies’ stock has rebounded nearly four times from its 52-week low of Rs 2,899 on March 24, 2020. It hit an all-time high of Rs 11,999 on Nov. 27. But a strong near-term growth momentum, still reasonable valuations on FY23E basis and incremental performance-linked incentive approvals, according to Credit Suisse, may further aid the rally. The global financial services provider has set a price target of Rs 14,000 apiece on the stock, implying a 21.5% upside from Monday’s closing levels.

Shares of Amber Enterprises, on the other hand, have more than doubled from their 52-week low of Rs 920.9 apiece on April 13, 2020, and hit a record high of Rs 2,544.95 apiece on Oct. 19. That, Credit Suisse Analyst Lokesh Garg said a note, may get a further boost from a “strong extant platform in terms of customers, manufacturing and track record, near-term growth visibility and opportunities from exports, PLI, along with reasonable valuations”.

The research firm has set a price target of Rs 3,000 apiece on Amber Enterprises, implying a potential upside of 31% from Monday’s closing.

Credit Suisse Bets On These Two Consumer Durable Stocks Despite Run-Up

Growth Opportunities For Dixon As Per Credit Suisse

  • Adding more product categories
  • Gaining market share
  • Deepening vertical integration and
  • Emerging as an ODM manufacturer in more categories and target exports

Growth Opportunities For Amber As Per Credit Suisse

  • A growing domestic AC market
  • Government policy support
  • Increasing wallet share from customers
  • Aiming to leverage scale in domestic market to target component and product exports to the U.S. and the Middle East.

Besides, Credit Suisse expects Dixon Technologies’ revenue, operating profit ad profit after tax to grow at annualised rates of 26%, 25% and 34%, respectively, over FY20-23. That, it said, is on account of a visible capacity addition, new customer sign-ups, margin accretion and opportunities emerging from PLI.

For Amber Enterprises, the research firm pegs the compounded annual growth rate for revenue and profit after tax at 15% and 28%, respectively, over FY20-23.

Shares of Dixon Technologies gained as much as 3% to Rs 11,868 apiece in Tuesday’s session, and are trading near their record high. Of the 20 analysts tracking the company, 17 have a ‘buy’ rating, two suggest a ‘hold’ and one recommends a ‘sell’. The stock is trading 6.8% higher than its 12-month Bloomberg consensus price target of Rs 11,058 apiece.

Shares of Amber Enterprises gained as much as 8.3% to Rs 2,481 apiece in Tuesday’s session. Of the 20 analysts tracking the company, 12 have a ‘buy’ rating, five suggest a ‘hold’ and three recommend a ‘sell’. The stock is trading near its 12-month Bloomberg consensus price target of Rs 2,405.9 apiece.

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