Dixon Tech, Kaynes, Syrma, Amber: EMS story over? JPMorgan answers

JPMorgan on Tuesday said its domestic Electronics Manufacturing Services (EMS)  coverage delivered widely divergent outcomes since the September quarter results, with Kaynes Technology India Ltd (down 35 per cent) and Dixon Technologies (India) Ltd (down 29 per cent) substantially lagging Avalon Technologies Ltd (down 8 per cent), Amber Enterprises India Ltd (down 9 per cent) and Syrma SGS Technology Ltd(11 per cent). The foreign brokerage said the sector story is not over, as it suggested five 'overweight' calls and one 'Neutral' rating, upgrading Amber Enterprises and Cyient DLM to 'Overweight' from 'Neutral'. Syrma SGS Technology remained its top sectoral pick. 

"We see every stock, barring Dixon, delivering over 20 per cent revenue growth over FY26-28E. Further, we see evidence of the sector upping value addition, evolving from finished product assembly to component and PCB manufacturing. Both of these suggest longer-term gains in the names, after underperformance," it said.

JPMorgan said it sees evidence of bottoming in that. YTD, none of the stocks are underperforming, and Syrma, Amber and Avalon are all now outperforming by 10-12 per cent in 2026 so far. 

"We see more to come. Our FY27E EPS for Syrma/Amber is 12 per cent/3 per cent ahead of the Street. Valuations have eased post underperformance but remain a risk at 32-60 times FY27E for stocks that miss expectations. We see Syrma and Amber as most likely to beat Street expectations and they head our pecking order of Syrma, Dixon, Amber, Kaynes, Cyient DLM and Avalon," it said.

JPMorgan said India EMS stocks are down 8-35 per cent in the last 4 months, painting a gloomy picture for the sector. This is mainly because Dixon and Kaynes, the market favorites for a long time, started to disappoint, which skewed the narrative. 

"However, Syrma, Amber and Avalon have been doing better than expectations and surprising positively. Story moving from FG to components and bare PCB. We continue to expect strong growth for the EMS universe, but the story is moving from finished goods assembly to component and bare PCB manufacturing," it said. 

The brokearge cited government's introduction of the electronics component manufacturing scheme last year with an outlay of Rs 22,900 crore, recently increased to Rs 44,000 crore in the budget. 

It said Syrma, Amber and Kaynes have received the required approvals for their bare PCB foray while Dixon has received approval for component manufacturing, thereby providing growth visibility. 

"Our bottom-up modelling of the various projects and approvals that these companies have already obtained gives us confidence that growth will be over 20 per cent over the next 2 years," it said.

It sees Syrma as a cleaner way to play EMS given the absence of any cyclical verticals.