Dixon Tech, Amber, PGEL, Syrma, EPACK: Demand recovery in sight; stocks a buy?

BOB Capital Markets has assigned a 'Buy' rating to Amber Enterprises India Ltd, PG Electroplast Ltd (PGEL) and EPACK Durable Ltd, while recommending a 'Hold' on Dixon Technologies (India) Ltd and Syrma SGS Technology Ltd. In a note on the electronics manufacturing services (EMS) sector, the brokerage said demand recovery is in sight, though margin quality is likely to remain a near-term drag.

The brokerage said weakness in room air conditioners (RAC) due to weather conditions and destocking linked to Bureau of Energy Efficiency (BEE) ratings had masked channel normalisation. It added that cost inflation and rupee depreciation could put pressure on margins, with price hikes likely to lag. BOB Capital Markets has rolled forward its estimates for EMS stocks to June 2028 earnings and said Amber Enterprises remains its preferred pick.

For Amber, it suggested a target of Rs 9,300. The brokerage suggested targets of Rs 12,000 on Dixon Tech, R 310 on EPACK, Rs 610 on PGEL and Rs 1,250 on Syrma. 

According to the note, RAC contract manufacturers had a weak March quarter due to supply-related issues. PGEL and EPACK reported revenue declines of 10 per cent and 8 per cent year-on-year, while their RAC revenue fell 12 per cent and 33 per cent respectively. The brokerage attributed this to weather-related weakness, BEE-led destocking and, in PGEL's case, around Rs 420 crore of disruption linked to LPG and trucks. Amber was the outlier, with CD up 9 per cent on wallet-share gains. BOB Capital Markets said it viewed the weakness as largely supply-led and driven by pre-buying linked to BEE rating changes, rather than a complete demand washout.

It said channel inventory had normalised, pointing to an FY27 base-effect recovery. Inventory has come down from a peak of around 50 lakh units to about 40 lakh units. PGEL and EPACK both indicated firmer sell-through in April and May, with 15-20 per cent price hikes already passed on. The industry is expecting around 15 per cent volume growth in the first quarter off a weak base. BOB Capital Markets said it believes FY27 demand will recover, though companies differ in their reading of the cycle, with PGEL viewing FY26 as a washout while, in the brokerage's view, Amber absorbed the same market.

On smartphones, the brokerage said weakness was led by pricing, while the margin dilution was optical because higher costs were passed through and conversion income remained stable. Dixon's revenue was broadly flat as average selling price inflation driven by memory costs affected mass-segment demand rather than market share. For FY27, volume guidance is flat excluding Vivo, with an additional 12-15 per cent increase led by pricing. The brokerage said localisation remains the structural story, with camera modules expected to scale to 19 crore units and the HKC display joint venture expected to reach mass production by the fourth quarter of FY26. However, it expects component accretion to offset the expiry of the production-linked incentive only from the second half of FY27. Vivo approval remains the key upside swing.

In diversified EMS, BOB Capital Markets said growth continued, but execution now differentiates companies. Syrma grew 58 per cent year-on-year on the back of exports, auto and railways, and has guided for 35 per cent FY27 growth on a Rs 6,600 crore order book. Avalon posted 40 per cent growth while remaining capex-light. Kaynes slowed to 26 per cent growth after an electric vehicle OEM cut volumes and orders slipped. The company withdrew guidance despite a Rs 9,000 crore order book. The brokerage described this as a timing-led miss, while noting that FY26 delivery had trailed even its reduced guidance.

BOB Capital Markets said it has rolled forward its target prices to June 2028 estimated earnings per share. It has largely retained its valuation multiples, while raising Syrma's target multiple from 35 times to 40 times one-year-forward earnings, citing strong execution and a robust order book. Amber remains its preferred pick, supported by an expected revenue and Ebitda CAGR of 25 per cent and 27 per cent respectively over FY26-FY29E, along with scope for further multiple re-rating. The brokerage said it maintains a June 2027 target price of Rs 9,300.