With electronics manufacturing services stocks like Amber Enterprises, Kaynes Technology, and Dixon Technologies delivering stellar returns in 2024—surging between 135% and 180%—the EMS sector in India is a high growth frontier, according to Jefferies.
This sector far outpaced the NSE Midcap index's 23% rise. For 2025, Jefferies remains bullish on the sector, particularly companies focused on backward integration and high-margin components, with Amber Enterprises as its top pick.
India's push for self-reliance in electronics manufacturing aligns with global shifts like the "China+1" strategy and the nation's competitive labor costs, believes Jefferies. With electronics accounting for 14% of India's imports and a per capita consumption of just $78 (far below the global average of $324), the market is primed for growth, says the brokerage.
Jefferies projects over 30% compound annual growth rate for the EMS industry from FY24 to FY26, driven by:
Government Initiatives: Production Linked Incentives and value-addition policies.
Structural Opportunities: Increasing demand for high-tech components like PCBs and semiconductors.
Domestic Innovation: Investments in backward integration, such as Amber's component ecosystem and Kaynes' semiconductor foray.
Sectoral Picks
Amber's strong foothold in margin-accretive components makes it the standout, according to the firm. The company is reportedly exploring an IPO for its electronics division, which contributes 19% of fiscal 2025's first half sales at a healthy 7-8% operating margin.
Kaynes' focus on semiconductors, PCBs, and outsourced semiconductor assembly and test positions it for long-term growth, says Jefferies. However, despite its potential, Jefferies rates Kaynes as 'hold' due to rich valuations.
With over 80% of revenue from original equipment manufacturing, Dixon's low-margin profile keeps it underperforming, holds the brokerage. Its mobile-focused PLI benefits are set to expire in 2-3 years, limiting growth visibility, they add.
Syrma's growth strategy in electronics components and government-aligned policies also align with Jefferies' positive outlook.
Amber and Kaynes lead this wave of diversification, with Amber's electronics division expected to unlock further value. However, risks such as demand slowdown, customer attrition, and supply chain bottlenecks could temper optimism.
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