India's electronics manufacturing services (EMS) sector is poised for robust growth, driven by diversification into high-margin verticals, expansion of product portfolios and strong demand across end-user segments, according to Motilal Oswal Financial Services.
The brokerage firm believes the EMS opportunity is expanding beyond traditional high-volume, low-margin electronics assembly into high-complexity areas such as semiconductor equipment, power infrastructure, aerospace, medical and defence.
Global data-centre investments are estimated to approach $7 trillion, while semiconductor equipment spending is expected to reach $190 billion by CY30. Against this backdrop, original equipment manufacturers are increasingly outsourcing specialised manufacturing to EMS partners to scale capacity without significant incremental capital expenditure.
Motilal Oswal said this shift towards capability-led outsourcing could materially expand the addressable market for Indian EMS companies and create a long-duration growth opportunity beyond conventional electronics assembly.
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The sector is also benefiting from component shortages and geopolitical risks, which are encouraging EMS companies to maintain higher inventory levels and secure supplies ahead of programme ramp-ups. Strong order inflows are being witnessed across segments, with particularly strong momentum in high-margin areas such as defence, aerospace, artificial intelligence, automotive, electric vehicles and clean energy.
EMS Sector Financial Outlook
Motilal Oswal expects its EMS coverage companies to deliver a 32% revenue CAGR, 37% EBITDA CAGR and 46% adjusted PAT CAGR during FY26–28E.
Improving operating leverage, a favourable product mix and normalisation of execution and supply-chain disruptions are expected to support margin expansion. The brokerage expects aggregate EBITDA margins to improve through FY28E, aided by greater exposure to automotive, industrial and defence segments.
It has also raised its FY28 earnings estimates for Cyient DLM by 5% and Avalon Technologies by 3%.
EMS Stocks to Buy
Kaynes Technology India | Buy | Target Price: Rs 5,000
Avalon Technologies | Buy | Target Price: Rs 2,740
Cyient DLM | Buy | Target Price: Rs 1,030
Syrma SGS Technology | Buy | Target Price: Rs 2,000
Dixon Technologies (India) | Buy | Target Price: Rs 16,100
Amber Enterprises India | Buy | Target Price: Rs 8,250
Data Patterns (India) | Neutral | Target Price: Rs 4,000
Motilal Oswal sees sustained order inflows, capacity additions and new product development across key verticals supporting the sector's long-term earnings trajectory.
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