Contract manufacturers do not have pricing power. A case in point is Dixon Technologies Limited. It is a contract manufacturer of televisions, washing machines, smartphones, LED bulbs, battens, downlighters and CCTV security systems for companies such as Samsung, Xiaomi, Panasonic and Philips. It has 17 manufacturing units in India. The PE of the company is over 100.
Management of Pitti Engineering Limited have also consciously decided to keep their margins low and stable. The rise in earnings will be through increase in volume. This is good for the health of the company.
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