The trade is increasing throughout segments, backed by rising work content material, higher execution visibility, and a gradual shift in direction of higher-margin classes like aerospace, industrial, automotive, and demanding infrastructure.
Order inflows stay agency, aided by new consumer additions, margin-accretive contracts, and prototype-to-production conversions. The cumulative order ebook for the EMS area (excluding Amber and Dixon) rose 23% YoY to INR 163 billion in FY25, highlighting the sector’s strong development momentum.
A number of macro drivers are fuelling home electronics demand, together with larger investments in surveillance, the evolution of electrical autos and AI purposes, and ongoing infrastructure upgrades. Low penetration of shopper electronics and rising earnings ranges additionally assist long-term development.
Moreover, the growing involvement of each international and Indian gamers is strengthening the native worth chain. Authorities-led initiatives such because the Manufacturing-Linked Incentive (PLI) and Digital Part Manufacturing Scheme (ECMS) are additional accelerating investments throughout segments like semiconductors and show modules.
EMS corporations are scaling up operations to match rising demand. New plant setups, export-oriented models, and investments in areas like OSAT and HDI PCB manufacturing are progressing nicely.These initiatives cater to rising wants from areas resembling Europe, GCC, and North America, whereas additionally enabling broader product choices. Most gamers noticed margin enhancements in FY25, a development prone to proceed, boosting earnings predictability.In abstract, the EMS trade is on a robust development trajectory, supported by favorable demand dynamics, growing exports, and deepening home integration.
With a supportive coverage setting, increasing capacities, and rising significance in international provide chains, the sector is nicely positioned to keep up its development momentum within the foreseeable future.
Kaynes Applied sciences: Purchase| Goal Rs 7300| LTP Rs 5770| Upside 26%
It’s poised for sturdy FY26 development with a income goal of INR45b, pushed by higher-margin new orders, working leverage, and growth throughout key verticals resembling automotive, aerospace, industrial, and medical.
Latest acquisitions have enhanced its international presence & opened new development alternatives, with future concentrate on high-margin ODMs & growth in South Asia & Europe.
HDI PCB and OSAT models are anticipated to commercialize by 4QFY26, focusing on INR25b income in FY27 and INR50b by FY28, with strong margins (~30%/20%). We estimate income/EBITDA/PAT CAGR of 57%/61%/70% over FY25–27, pushed by scale and margin good points.
Avalon Applied sciences: Purchase| Goal Rs 1030| LTP Rs 828| Upside 24%
Firm’s long-term income trajectory is anticipated to be sturdy, backed by: 1) the addition of latest clients within the US and Indian markets, 2) order inflows from the high-growth/high-margin industries, resembling clear vitality, mobility, and industrials, 3) strategic collaborations and 4) venturing into superior know-how segments.
Administration guided for 18-20% income development in FY26, with gross margins of 33-35%. Strategic collaborations (e.g., with Zepco) and capex plans to broaden capability will assist future development. We anticipate a CAGR of 28%/40%/58% in income/EBITDA/adj. PAT over FY25-FY27.
(The writer is Head – Analysis, Wealth Administration, Motilal Oswal Monetary Providers Ltd)
(Disclaimer: Suggestions, options, views, and opinions given by specialists are their very own. These don’t symbolize the views of the Financial Occasions)
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