The Budget 2026 speech from Nirmala Sitharaman had special perks for Electronics Manufacturing Services (EMS) players such as Dixon Technologies and Kaynes Technologies, with the government doubling the budget for the electronics component manufacturing scheme (ECMS) to Rs 40,000 crore in FY27.
This announcement was part of the Budget's wider push for India Semiconductor Mission 2.0, with the nation looking to become a hub for semicon manufacturing. In light of the announcement, Jefferies has come out with a note on the EMS space, where the brokerage highlighted a decline of 81% in mobile PLI allocation, indicating no extension.
Jefferies believes this can be a net negative for Dixon Tech, as mobile + EMS is 90% of the company's total sales. The brokerage adds that it prefers Amber Enterprises and Syrma as top picks, as far as the EMS space is concerned.
Morgan Stanley has come out with a separate note on Dixon Tech, maintaining an 'underweight' rating on the counter while retaining the target price of Rs 8,157. The brokerage firm pointed out the possibility of Mobile PLI phasing out, in what could be a major blow for Dixon.
Morgan Stanley says the provision indicates phasing out of the scheme and a very low possibility of being extended beyond March 2026, as the government focuses on increased value addition.
This is getting reflected in higher allocation for semiconductor fabs, OSAT, semis lab, Indian Semiconductor Mission 2.0 and electronic components.
Keeping that in mind, Morgan Stanley believes Dixon's value proposition will likely change significantly post expiry of PLI benefits, while brands could look to diversify to other EMS competitors. This, in turn, could impact growth or net working capital.
Despite the recent reports, shares of Dixon Tech have opened slightly higher in trade on Monday.
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