EMS Sector Check - Building Foundation For Sustainable Growth: Motilal Oswal

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Motilal Oswal Report

India's electronics manufacturing services industry is booming thanks to the addition of new segments, increasing domestic manufacturing, import substitution, and global partnerships. In this report, we discuss about the changing dynamics of the EMS industry in FY24, the strategies adopted by the companies and evolving opportunities for them. Our coverage companies in the EMS industry are Kaynes Technology Ltd., Avalon Technologies Ltd., Syrma SGS Technology Ltd., Cyient DLM Ltd., and Data Patterns India Ltd.

The industry is undergoing a transformation with changing dynamics. Although there is short-term margin pressure due to strategic investments, the long-term outlook looks positive. The strategies implemented by EMS companies are expected to drive strong revenue growth and boost margins in the future.

EMS companies are doing technological tie-ups to quickly scale up as they need advanced tech to sustain growth. Building tech in-house is a time-consuming process, so partnering with global OEMs is a win-win deal for both, as global OEMs gain access to India's growth market and EMS companies get a tech boost.

We believe the growth momentum for the EMS industry will remain intact in the medium term, led by strong execution of the growing order book from the existing and new end-user industries. We expect our EMS coverage companies to report a CAGR of 39%/48%/54% in revenue/Ebitda/adjusted profit after tax over FY24-26.

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Motilal Oswal EMS Sector Update.pdf

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Also Read: EMS Industry - A Mixed Bag Q4; Management Guidance Remains Robust: Systematix

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