The Electronics Manufacturing Services (EMS) sector has emerged as a standout performer on Dalal Street this year, with numerous stocks delivering extraordinary returns. Investors in companies such as PG Electroplast, Dixon Technologies, and Kaynes Technologies have witnessed substantial gains, with some stocks doubling in value.

Stellar Stock Performances

PG Electroplast has achieved a remarkable 140% return, with its share price skyrocketing from ₹237.36 to ₹567.

Dixon Technologies has also experienced a significant 96% return, showcasing its impressive stock performance.

Kaynes Technologies has seen its share price surge from ₹2,600 to ₹5,019, reflecting a 92% increase.

Other notable performers include Elin Electronics and Amber Enterprises, which have reported gains of 49% and 35%, respectively.

These impressive performances are a testament to the rapid growth and evolving dynamics of the Indian EMS sector.

Drivers of Growth

The surge in stock prices mirrors the Indian EMS sector’s robust expansion, driven by several key factors:

Government Policies: Initiatives such as the Production-Linked Incentive (PLI) scheme and the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) have significantly boosted the sector.

China+1 Strategy: India’s “China+1” strategy is positioning it as a key global manufacturing hub, enhancing its manufacturing capabilities and export potential.

Cost Competitiveness: India’s cost advantage, combined with its strong infrastructure and skilled workforce, has further strengthened its position in the global electronics market.

Market Outlook

The global electronics industry is projected to reach US$3.1 trillion by CY26, growing at a 4.9% CAGR. The EMS sector is anticipated to outpace this growth, expanding at a 5.4% CAGR to reach US$1.1 trillion. India’s share in the global EMS market is expected to quadruple, reaching 7% and US$80.2 billion by CY26. This growth is driven by a burgeoning domestic electronics market, which is projected to grow by approximately 25.5% to US$282 billion.

Strong Financial Performance

In the June quarter, the seven EMS companies covered by Systematix Institutional Equities saw impressive growth:

77% increase in revenue year-on-year

63% rise in EBITDA

75% jump in PAT

This performance was notably higher than expectations, driven by strong demand for cooling products. Companies are optimistic about their growth prospects following this robust first-quarter performance.

Broker Insights

Motilal Oswal has recently initiated coverage on Dixon Technologies with a ‘buy’ rating, setting a target price of ₹15,000 per share. The brokerage highlights Dixon’s rapid growth, diversification, and efforts to increase market share through technology partnerships and new clients.

Similarly, Motilal Oswal has given Amber Enterprises a ‘buy’ rating and set a target price of ₹5,000 per share. The focus is on Amber’s strategic diversification into high-growth electronics markets and its evolution from Amber 1.0 to Amber 3.0, which is expected to reduce business cyclicality and improve asset turnover.

Overall, the EMS sector's strong performance and growth outlook make it an attractive investment choice, bolstered by favorable policies, global strategies, and robust domestic and international demand.

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