Motilal Oswal bullish on EMS; suggests 'Buy' on Dixon Tech, Kaynes, Syrma

Motilal Oswal estimates a 30 per cent compound annual growth rate (CAGR) in aggregate revenue of their EMS coverage companies over FY25-28.

Motilal Oswal Financial Services is bullish on electronics manufacturing services (EMS), citing a robust growth trajectory ahead, driven by government support in the form of the production-linked incentive (PLI) scheme, diversification into high-margin verticals, and strong traction

across segments.  

The brokerage has a ‘Buy’ rating on Kaynes Technology (Target: ₹8,200), Avalon Technologies (Target: ₹1,330), Cyient DLM (Target: ₹550), Syrma SGS Technology (Target: ₹960), Dixon Technologies (Target: ₹22,500), and Amber Enterprises (Target: ₹8,400). Further, it has a ‘Neutral’ rating on Data Patterns (Target: ₹2,950).  

Analysts estimate a 30 per cent compound annual growth rate (CAGR) in aggregate revenue of their EMS coverage companies over FY25-28. Consequently, the combined Earnings before interest, tax, depreciation and amortisation (Ebitda) margin is likely to expand over FY25-28E, fuelled by favourable operating leverage. Accordingly, Ebitda is expected to register a 36 per cent CAGR over FY25-28. 

ECMS to boost momentum

Motilal Oswal expects India’s electronics manufacturing services (EMS) sector to scale rapidly, supported by a domestic ecosystem target of $500 billion by FY31. The Indian electronics system design & manufacturing (ESDM) market is projected to grow at a 27 per cent CAGR, reaching $141 billion by CY30. To fuel this, the government increased the electronics components manufacturing scheme (ECMS) outlay from ₹22,900 crore to ₹40,000 crore in the 2026 Budget.

Key project approvals under ECMS:

• Kaynes Technology: Received a ₹3,280 crore grant for manufacturing multi-layer PCBs, camera modules, and copper-clad laminates in Tamil Nadu.
• Syrma SGS: Secured approval for a PCB project in Andhra Pradesh, targeting ₹2,500 crore in annual revenue with production starting in FY28.
• Dixon Technologies: Received project approval in the third tranche of the scheme.

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Strategic diversification and growth drivers

EMS players are shifting toward high-value, technology-driven verticals to strengthen market positioning:

• Kaynes Technology: Industrial vertical contribution rose from 33 per cent in FY21 to 55 per cent in FY25.
• Syrma SGS: Pivoting toward high-margin sectors like smart meters, EV chargers, and healthcare devices.
• Avalon Technologies: Partnered with a global semiconductor firm for complex Industry 4.0 systems, with a full ramp-up expected in FY27.
• Dixon Technologies: Scaling via JVs in mobile phones (Vivo, Longcheer), IT hardware, and consumer appliances (Eureka Forbes).
• Amber Enterprises: Expanded its commercial AC range up to 17.5 tons to counter business cyclicity.

This collective diversification into emerging technology spaces is expected to drive both revenue growth and margin expansion across the sector.

Strong order inflows

EMS companies are witnessing increasing order inflows across various segments, with particularly strong traction in high-margin sectors such as defense, aerospace, automotive, telecom, power electronics, and clean energy. The aggregate order book (excluding Amber and Dixon) saw a healthy growth rate of 27 per cent year-on-year (Y-o-Y) and stood at ₹20,600 crore as of Dec’25. This growth was driven by companies that are consistently witnessing strong traction in the pipeline.  READ | Nomura upbeat on private port players; bets on JSW Infra, Adani Ports

Strong revenue momentum with margin expansion

According to the brokerage, aggregate revenue surged 32 per cent Y-o-Y to ₹54,700 crore in 9MFY26. Data Pattern led with 86 per cent Y-o-Y growth, followed by Avalon’s revenue at 49 per cent Y-o-Y. Kaynes Technology’s revenue jumped 37 per cent Y-o-Y.  

Aggregate Ebitda grew 41 per cent Y-o-Y to ₹3,180 crore in 9MFY26, with margins expanding 40 basis points (bps) Y-o-Y to 5.8 per cent. Most companies saw expansion of margins driven by a favourable product mix and operational efficiencies. The key exceptions were:

• Data Patterns: Margins contracted 9 percentage points (pp) due to the execution of a low-margin strategic contract.
• Amber Enterprises: Margins dipped 15 bps, primarily due to weakness in the consumer durables segment in Q2FY26.

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