Shares of Dixon Technologies, a prominent electronic device manufacturing service provider, experienced a 1.4 percent decline, reaching a one-month low of Rs 4,738 per share on the BSE during intraday trading on September 25. This drop followed reports indicating that the government is postponing import restrictions on personal computers, laptops, and tablets for a period of 9-12 months, starting from October 30.
Dixon Technologies’ stock price has dipped by 9.3 percent from its 52-week high of Rs 5,225 recorded on September 5. Furthermore, the company’s shares have declined by 5 percent this month, in contrast to the 2 percent gain observed in the benchmark Sensex.
Kotak Institutional Equities analysts have issued a ‘sell’ recommendation for Dixon Technologies, highlighting potential downsides to a future value (FV) of Rs 4,000. They expressed caution regarding the entire electronic manufacturing service (EMS) sector.
The brokerage firm emphasized, “The news regarding the ministry’s decision to defer regulatory restrictions for another 2-3 quarters suggests a significant slowdown in the expansion of IT hardware manufacturing in India.”
Reportedly, the Ministry of Electronics and IT (MeitY) has proposed cancelling plans to impose licensing requirements for the import of IT hardware products, including laptops, tablets, and servers, even in the longer term.
Until October 2024, there will be no quantity control on the import of IT hardware products. Import authorization will be granted to companies based on three criteria: the import value of the previous year or an average of the past three years for IT products and domestic manufacturing of IT hardware devices.
The import management system will be overseen by the Directorate General of Foreign Trade (DGFT), and the process will be fully digitized.
Kotak analysts pointed out that barriers to scaling up laptop manufacturing, as compared to mobile manufacturing, stem from inherent differences, including a smaller market size, limited value addition by EMS players, the absence of duty arbitrage to promote local manufacturing, and the lack of a major laptop brand equivalent to Apple in the mobile phone sector.
