Kaynes and Dixon Technologies: Red flags investors should know before buying these stocks 

Synopsis: JPMorgan slashed price targets on Kaynes and Dixon despite staying bullish long term. Key Risks include weak mobile demand, delayed projects, possible guidance cuts, and heavy dependence on government and smartphone segments.

Kaynes Technology and Dixon Technologies, both major players in electronics manufacturing services (EMS), have experienced a decline in their shares recently. Multiple brokerages have reduced their price targets, and JPMorgan has now also initaited a coverage on them. 

While JPMorgan remains positive on the long-term prospects and has maintained an “overweight” rating, that doesn’t mean there aren’t concerns. Investors should pay close attention to the risks JPMorgan highlighted in its report. Sometimes the details are more important than the headline. In this article, we will dive deeper into it.

Red flags for Dixon Technologies

JPMorgan has slashed Dixon’s price target by 30 percent, lowering it from Rs 19,600 to Rs 13,700 per share. They cited that they are not seeing much growth this year; their sales are expected to be basically flat versus last year, which was unusually strong. On top of that, mobile phone sales are looking weak. Memory (RAM) prices are rising, so handsets are getting more expensive, which is putting off buyers.

Additionally, JPMorgan believes Dixon will need to reduce its mobile volume forecasts for FY26 and FY27, since the green light for its partnership (JV) with Vivo to manufacture phones keeps getting delayed. Margins might see a slight uptick by 20 bps to 3.9 percent, but with no clear growth and so much depending on the mobile business, there’s still a lot of risk here.

Red flags for Kaynes Technology

JPMorgan also lowered Kaynes’ price target by 20 percent, cutting it from Rs 7,550 to Rs 6,100 per share. Even after this reduction, there’s still significant upside from the current stock price, but a few major risks remain. The brokerage highlighted that the Kavach programme, which is a railway safety initiative, might face delays. If that happens, Kaynes may have to cut its FY26 revenue guidance from Rs 4,400 crore to Rs 4,000 crore.

This underscores one of Kaynes’ main challenges: the company depends heavily on large government projects. When these projects fall behind schedule, revenue is directly affected. On the positive side, revenue could still grow around 30 percent YoY in the short term, fueled by strong demand in the automotive and industrial sectors. Additionally, high-margin smart meter orders could push EBITDA margins by 130 bps to 15.5 percent, giving operating profits a solid lift. 

What investors should take away?

Earlier, Jefferies had also cut price targets for both stocks, which pretty much shows how cautious brokerages are right now. While there’s still potential for long-term growth, a few concerns are clear: growth is slowing, projects keep getting pushed back, there’s too much reliance on certain areas, and it’s tougher to predict where guidance is headed.

If you’re considering investing, the long-term prospects still seem appealing. But don’t ignore the rough patches ahead or the risk that things might not work out as expected. Jumping in just because analysts are optimistic, without really understanding the challenges, is an easy way to end up disappointed.

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