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PL Capital Report
India's electronic manufacturing services (EMS) sector is expected to deliver another quarter of healthy revenue growth in Q1FY27, supported by robust order execution across key players, according to PL Capital. However, rising raw material costs could weigh on profitability, leading to modest margin compression across the sector.
In its latest EMS sector preview, PL Capital expects its coverage universe to report 24.2% YoY revenue growth, while Ebitda and profit after tax (PAT) are likely to rise 21.3% and 26.5%, respectively, during the June quarter.
Among the companies under coverage, Syrma SGS Technology is expected to be the standout performer. PL Capital projects Syrma's revenue to surge 52.1% YoY, driven by strong growth across the automotive, industrial and consumer segments. The brokerage expects the company to post 85% YoY growth in PAT and a slight improvement in Ebitda margin to 9.5%.
Cyient DLM is also expected to report a strong quarter, with revenue growth of 26.4% YoY backed by healthy momentum in the industrial and aerospace businesses. Profit is estimated to more than double from a year ago, aided by operating leverage and healthy order inflows.
For Avalon Technologies, PL Capital expects revenue growth of 27% YoY, supported by strong demand from mobility, industrial and clean-energy segments. The brokerage forecasts PAT growth of nearly 69% YoY and a modest margin expansion. Despite improving fundamentals, PL Capital recently downgraded the stock to 'Reduce' from 'Hold' following its sharp rally.
Amber Enterprises is likely to report relatively slower revenue growth of 16% YoY, impacted by moderate growth in its consumer durables segment. Nonetheless, the company is expected to deliver 25% growth in profit aided by continued expansion in its electronics manufacturing business.
Meanwhile, Kaynes Technology is expected to post revenue growth of 25% YoY, but profitability could come under pressure. PL Capital estimates Ebitda margin contraction of around 200 basis points, leading to a 27% decline in PAT, largely due to a high base and product mix-related factors.
Looking ahead, the brokerage expects order inflows to improve across the EMS space as companies focus on higher-margin segments and specialised manufacturing opportunities. This, in turn, could support margin expansion and earnings growth in the coming quarters.
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