Electronics manufacturing firms tipped to outperform indices this year

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Subscribe to enjoy similar stories. New Delhi: Electronics manufacturing services (EMS) companies which rallied sharply on stock markets over the past year before last month's decline have room for growth given the expected rollout of government incentives and the inherent growth potential of homegrown companies, multiple analysts said. Shares of companies such as Dixon Technologies, Amber Enterprises, Kaynes Technology and Syrma SGS Technology may clock strong double-digit growth, they said, outperforming headline indices.

Nirransh Jain, India analyst, consumer durables and EMS at brokerage firm BNP Paribas, said that despite valuation concerns, the core business operations of EMS firms remain strong. “Concerns around the high valuation of EMS firms are true, especially with the sharp run-up in stock prices that we’ve seen over the past year. But the high value is also underlined by strong underlying growth and fundamentals.

The likes of Dixon and Kaynes have seen strong growth every quarter in the past three quarters. If this momentum can be maintained, such valuations are likely to be sustained in the long run—giving EMS stocks room for good growth. Recent acquisitions, tie-ups and business ramp-ups are also adding to organic growth, which can add further partial support to their valuations," Jain said.

Also read | TVS Electronics plans long term EMS play In the past year, shares of Dixon Technologies gained 69.8% to a record ₹19149.80, before losing 21% as of Tuesday. At a price-to-equity ratio of 145.3, the company’s valuation remains high. Similarly, Kaynes Technology rose 121% in a year to ₹7824.95, before correcting 23% as of Tuesday.