According to brokerage firm Motilal Oswal, the electronics manufacturing services (EMS) industry is well positioned for a strong growth trajectory. Key players in the sector, namely Kaynes Technology, Avalon Technologies, Syrma SGS and Cyient DLM, are expected to witness a CAGR of 47 per cent revenue growth between FY24 and FY26, the brokerage firm stated.
The industry, excluding Dixon Technologies and Amber Enterprises, has a collective order book of Rs 14,100 crore as of June 2024, almost double the aggregate revenue of the sector in FY24, the Mumbai-based brokerage said.
However, despite revenue growth in fiscal 2024 and the first quarter of the current fiscal year, margins declined, weighing on earnings. The sector’s EBITDA margin fell 40 basis points year-on-year in fiscal 2024. Despite this margin decline, the recovery could lead to an upward revision in overall earnings growth.
For the next financial year, the industry is projected to achieve a CAGR of 49% in EBITDA, driven by new order execution and improved margin profiles, Motilal Oswal said.
Top performers such as Kaynes Technology are leading the trend, with a 68% year-on-year increase in their order book, while Avalon Technologies and Syrma SGS have also secured major contracts in sectors such as rail, aerospace and medical devices. The EMS sector is also expected to benefit from expanding customer bases and increasing traction in emerging markets such as electric vehicles (EVs) and clean energy solutions, the brokerage said.
Despite the headwinds, strong order intake and continued customer acquisition efforts in the sector indicate sustained growth, with new opportunities on the horizon. Analysts remain optimistic on the sector and expect margin recovery and favourable revenue mix in the coming years, Motilal Oswal added.
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