India's electronic manufacturing services (EMS) sector is expected to post a 21% year-on-year revenue growth in the first quarter of FY27, driven by healthy demand across consumer and industrial segments, according to a report by Kotak Institutional Equities.
Margins Under Pressure
The report highlighted that margins are likely to remain under pressure due to higher raw material costs and changes in product mix. Despite strong revenue growth, profitability may be constrained.
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.
Key Findings from Kotak Report
"We expect a steady 1QFY27 for our EMS coverage, with revenue and EBITDA projected to grow 21% year-on-year and 18% 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% quarter-on-quarter, led by strong demand in its mobile and consumer electronics businesses. On Thursday, Dixon Technologies announced a joint venture with Vivo to manufacture smartphones in India.
Amber Enterprises is also expected to post around 25% year-on-year revenue growth, supported by its consumer durables, electronics, and railway businesses.
Profitability Concerns
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.
Positive Outlook
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.
