BOB Capital Markets has issued a detailed outlook on India's Electronics Manufacturing Services (EMS) sector, projecting a significant demand recovery by fiscal year 2027 (FY27). The brokerage, while acknowledging near-term margin pressures, has updated its ratings and target prices for several key players, rolling forward estimates to June 2028 earnings.
Brokerage Recommendations and Target Prices
Amber Enterprises Ltd. remains BOB Capital Markets' preferred pick, receiving a 'Buy' rating with a target price of Rs 9,300. 'Buy' ratings were also assigned to PG Electroplast Ltd (PGEL) with a target of Rs 610, and EPACK Durable Ltd, targeting Rs 310. Dixon Technologies (India) Ltd and Syrma SGS Technology Ltd received 'Hold' recommendations, with target prices of Rs 12,000 and Rs 1,250 respectively.
Signs of Demand Recovery
The first quarter of 2026 saw weakness in the room air conditioner (RAC) segment, primarily due to weather conditions and destocking related to new Bureau of Energy Efficiency (BEE) ratings. PGEL and EPACK, key RAC contract manufacturers, reported revenue declines of 10% and 8% year-on-year respectively, with RAC revenue falling even more sharply. Amber Enterprises, however, proved an outlier, showing a 9% increase in its consumer durables segment due to wallet-share gains.
BOB Capital Markets views this weakness as largely supply-led and influenced by pre-buying ahead of BEE rating changes, rather than a fundamental demand collapse. Crucially, channel inventory has normalized, decreasing from a peak of 50 lakh units to about 40 lakh units. Both PGEL and EPACK have indicated firmer sell-through in April and May, supported by 15-20% price hikes already implemented. The industry anticipates approximately 15% volume growth in the first quarter, albeit from a weak base.
Smartphone and Diversified EMS Segments
In the smartphone sector, pricing weakness has impacted demand, particularly in the mass segment, though margin dilution is considered optical as higher costs are being passed through. Dixon Technologies experienced broadly flat revenue, affected by average selling price inflation driven by memory costs. Localization remains a structural growth driver, with camera modules expected to scale significantly and the HKC display joint venture targeting mass production by Q4 FY26.
The diversified EMS segment continues to grow, but execution is now a key differentiator. Syrma SGS Technology reported a robust 58% year-on-year growth, bolstered by exports, automotive, and railway orders, guiding for 35% growth in FY27 based on a Rs 6,600 crore order book. Avalon posted 40% growth with a capex-light approach. In contrast, Kaynes slowed to 26% growth following volume cuts from an electric vehicle OEM and order slips, leading the company to withdraw its guidance despite a Rs 9,000 crore order book.
Outlook and Preferred Pick
BOB Capital Markets has largely maintained its valuation multiples, raising Syrma's target multiple to 40 times one-year-forward earnings due to strong execution. Amber Enterprises remains the brokerage's top pick, supported by an expected revenue and EBITDA Compound Annual Growth Rate (CAGR) of 25% and 27% respectively over FY26-FY29E, alongside potential for further multiple re-rating.