Shares of Dixon Technologies were soaring on Tuesday morning after the company bagged a major contract from Lenovo. However, analysts at Kotak Securities and Morgan Stanley did not seem very impressed by the development.

What Happened: On Monday evening, Dixon Technologies announced that its wholly-owned subsidiary, Padget Electronics, has been granted a contract by Lenovo for the manufacturing of laptops and notebooks. This contract falls under the Production-Linked Incentive (PLI) 2.0 Scheme.

The announcement today helped the stock jump up over 5% to hit a new 52-week high of ₹6,765. The electronics manufacturer has been on a bull rally at the bourses. In the last 30 days, the stock has surged up 25%.

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Talking about the Lenovo contract, Kotak Securities said that while the tie-up is a positive, the “expectations are still quite ambitious”. The brokerage firm said that through its partnership with Lenovo and Acer, aims to capture a significant share of the Indian IT hardware market, targeting approximately 25%. Lenovo and Acer collectively constitute a substantial portion, accounting for nearly 25-30% of the Indian IT hardware market.

While the venture into IT hardware is a notable move for Dixon Technologies, the brokerage highlighted that the mobile segment remains a key focus for the company’s near-term performance and growth strategy. The brokerage maintained its “sell” rating on the stock with a target price of ₹4,200. Morgan Stanley also said that the move was positive but retained its “underweight” rating for the stock with a price target of ₹4,374. The target indicates an around 30% downside from the current market price.

Price Action: Dixon Tech’ share price was up 2.23% to trade at ₹6,514.50 on Wednesday morning.

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