EMS sector likely to report 21% revenue growth; margins may stay under pressure: Kotak
New Delhi, July 10
India's electronic manufacturing services sector is likely to post 21 per cent year-on-year revenue growth in the first quarter of FY27, driven by healthy demand across consumer and industrial segments, according to a Kotak Institutional Equities report.
The report said margins are expected to remain under pressure due to higher raw material costs and changes in product mix.
It said the sector's outlook remains positive, supported by rising electronics manufacturing activity and expected policy measures, including the proposed Mobile PLI 2.0 and ISM 2.0 schemes. However, the report noted that the benefits would depend on the final design and implementation of these schemes
."We expect a steady 1QFY27 for our EMS coverage, with revenue and EBITDA projected to grow 21 per cent year-on-year and 18 per cent year-on-year, respectively, as healthy topline growth is partly offset by margin pressures," the report said.
Among consumer-focused EMS companies, Kotak expects Dixon Technologies to report the strongest performance, with revenue increasing 43 per cent quarter-on-quarter, led by strong demand in its mobile and consumer electronics businesses. On Thursday, Dixon Technologies announced a JV with Vivo to manufacture smartphones in India.
Amber Enterprises is also expected to post around 25 per cent year-on-year revenue growth, supported by its consumer durables, electronics and railway businesses.
The report, however, said profitability at Dixon Technologies and Amber Enterprises is likely to remain under pressure due to the absence of Mobile PLI benefits for Dixon and higher raw material costs for Amber.
In the business-to-business EMS segment, Kotak expects healthy growth across companies. Syrma SGS Technology, Avalon Technologies and Cyient DLM are likely to benefit from improved operating leverage and margin expansion.
Kotak maintained a positive outlook on the EMS sector, citing sustained demand, better execution and supportive government policies as key drivers for strengthening India's electronics manufacturing ecosystem.
— ANI
Reader Comments
Great to see Dixon Technologies doing so well, especially with the Vivo JV for smartphone manufacturing. This is exactly the kind of 'Make in India' success story we need. But I hope the margin issues don't dampen the enthusiasm for long-term investors. 📈
Interesting data from Kotak. While the revenue growth is solid, the margin pressure from raw material costs and product mix changes is a legitimate worry. The proposed PLI 2.0 and ISM 2.0 could be game-changers, but only if they're designed with input from actual manufacturers. Let's hope for better execution.
The B2B segment really catching up with improved operating leverage - Syrma SGS and Avalon are on a roll! But I'm skeptical about how much of this growth is sustainable without consistent policy support. Also, Amber's railway business is a nice diversification move. 👍
Growth at 21% is decent, but the margin pressure is a red flag. If raw material costs keep rising, companies might struggle to pass them on to consumers. The sector needs more than just revenue growth - profitability is key for long-term investor confidence.
No Mobile PLI benefits for Dixon, but still they're growing 43% QoQ - that's some serious execution! The Vivo JV is a masterstroke. But I'm worried about the sector overall - margins staying under pressure despite all this growth feels like we're leaving money on the table. 😐
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