Kaynes & Avalon Poised for Strong CAGR Through FY27 on Scale; Motilal Oswal sees over 20% upside each
India's
Electronics Manufacturing Services
(EMS) sector is witnessing rapid growth, supported by a strong order pipeline, ongoing capacity additions, and improving global relevance.
The
industry
is expanding across segments, backed by rising work content, better execution visibility, and a gradual shift towards higher-margin categories like aerospace, industrial, automotive, and critical infrastructure.
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Order inflows remain firm, aided by new client additions, margin-accretive contracts, and prototype-to-production conversions. The cumulative order book for the EMS space (excluding Amber and Dixon) rose 23% YoY to INR 163 billion in FY25, highlighting the sector's robust growth momentum.
Several macro drivers are fuelling domestic electronics demand, including higher investments in surveillance, the evolution of electric vehicles and AI applications, and ongoing infrastructure upgrades. Low penetration of consumer electronics and rising income levels also support long-term growth.
Additionally, the increasing involvement of both global and Indian players is strengthening the local value chain. Government-led initiatives such as the
Production-Linked Incentive
(PLI) and Electronic Component Manufacturing Scheme (ECMS) are further accelerating investments across segments like semiconductors and display modules.
Live Events
EMS companies are scaling up operations to match growing demand. New plant setups, export-oriented units, and investments in areas like OSAT and HDI PCB manufacturing are progressing well.
These initiatives cater to rising needs from regions such as Europe, GCC, and North America, while also enabling broader product offerings. Most players saw margin improvements in FY25, a trend likely to continue, boosting earnings predictability.
In summary, the EMS industry is on a strong growth trajectory, supported by favorable demand dynamics, increasing exports, and deepening domestic integration.
With a supportive policy environment, expanding capacities, and growing importance in global supply chains, the sector is well placed to maintain its growth momentum in the foreseeable future.
Kaynes Technologies: Buy| Target Rs 7300| LTP Rs 5770| Upside 26%
It is poised for strong FY26 growth with a revenue target of INR45b, driven by higher-margin new orders, operating leverage, and expansion across key verticals such as automotive, aerospace, industrial, and medical.
Recent acquisitions have enhanced its global presence & opened new growth opportunities, with future focus on high-margin ODMs & expansion in South Asia & Europe.
HDI PCB and OSAT units are expected to commercialize by 4QFY26, targeting INR25b revenue in FY27 and INR50b by FY28, with robust margins (~30%/20%). We estimate revenue/EBITDA/PAT
CAGR
of 57%/61%/70% over FY25–27, driven by scale and margin gains.
Avalon Technologies: Buy| Target Rs 1030| LTP Rs 828| Upside 24%
Company's long-term revenue trajectory is anticipated to be strong, backed by: 1) the addition of new customers in the US and Indian markets, 2) order inflows from the high-growth/high-margin industries, such as clean energy, mobility, and industrials, 3) strategic collaborations and 4) venturing into advanced technology segments.
Management guided for 18-20% revenue growth in FY26, with gross margins of 33-35%. Strategic collaborations (e.g., with Zepco) and capex plans to expand capacity will support future growth. We expect a CAGR of 28%/40%/58% in revenue/EBITDA/adj. PAT over FY25-FY27.
(The author is Head – Research, Wealth Management,
Motilal Oswal Financial Services Ltd
)
(
Disclaimer
: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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