CG Power to Syrma: Macquarie’s Outperform picks with up to 22% upside amid India’s chip push

India’s semiconductor push is entering a broader phase, and in its recent report Macquarie said ISM 2.0 had moved beyond a subsidy programme towards building a domestic semiconductor supply chain. CG Power, Syrma SGS Technology and Amber Enterprises stand out among the brokerage’s covered stocks

The brokerage described the policy as “Building the ecosystem and increasing value addition”, with the programme covering semiconductor equipment, materials, chemicals, gases, testing infrastructure, advanced research and development and talent development.

The programme carries an outlay of Rs 1.27 lakh crore, and Macquarie said the broader policy ambition was to build domestic capability as India targets more than 10% of the global semiconductor market by 2035.

CG Power: Macquarie rates ‘Outperform’

CG Power and Industrial Solutions Ltd. emerged as the strongest stock on Macquarie’s potential-return measure, with an ‘Outperform’ rating, a Rs 1,090 target price and an indicated 22% total shareholder return.

Macquarie said management was evaluating the economics of ISM 2.0 before deciding whether to expand its semiconductor facilities. The company’s immediate priority, however, remained ramping up its existing footprint as the main plant began production.

That leaves CG Power with an existing semiconductor operation that can be scaled further if the economics under the new framework prove attractive. Macquarie said the company’s key risks included delays or weakness in new orders, a global decline in artificial intelligence-related capital expenditure, higher commodity prices and increased competition that could hurt margins.

Syrma SGS: Technology-led semiconductor opportunity stands out

Syrma SGS Technology was another stock Macquarie viewed favourably, with an ‘Outperform’ rating, a Rs 1,700 target price and an indicated 18% total shareholder return.

Macquarie said Syrma SGS appeared to be “among the most serious EMS contenders under ISM 2.0.” The company had confirmed discussions with global partners and had expressed interest in higher-value segments of the semiconductor value chain.

The brokerage noted that management had preferred technology-led opportunities rather than commoditised assembly activities. Macquarie said that positioning aligned well with the direction of the new policy framework, which places greater emphasis on building domestic capabilities across the semiconductor chain.

Amber Enterprises: Broader electronics localisation is the opportunity

Amber Enterprises carried an ‘Outperform’ rating and a Rs 8,900 target price, with an indicated 17% total shareholder return.

Macquarie said it had not heard management articulate a semiconductor strategy or indicate participation under ISM 2.0. Instead, the company’s current priorities were component localisation under the Electronics Components Manufacturing Scheme and scaling smartphone manufacturing opportunities, including its Oppo partnership.

The brokerage therefore expected Amber to remain a beneficiary of electronics localisation rather than a direct semiconductor participant. As the domestic ecosystem expands, Macquarie said electronics manufacturing services companies could benefit from greater localisation, higher precision-manufacturing requirements and increased production of semiconductor-related equipment and subsystems.

Avalon Technologies: Semiconductor equipment gives it a direct link

Avalon Technologies offered a more direct exposure to the equipment side of the semiconductor opportunity. Macquarie said the company was already positioned within one of the attractive pillars of ISM 2.0 through semiconductor equipment manufacturing.

The brokerage said Avalon had established relationships with a large global equipment player and could benefit if global equipment suppliers localised manufacturing and supply chains in India.

Macquarie retained an ‘Outperform’ rating and a Rs 2,050 target price, although the indicated total shareholder return was -13%.

Dixon Technologies: Scale helps, but large semiconductor bets look less natural

Dixon Technologies had an ‘Outperform’ rating and a Rs 16,000 target price, with an indicated 9% total shareholder return.

Macquarie said Dixon’s manufacturing scale and execution capabilities could theoretically position the company for opportunities such as display manufacturing. However, the brokerage expected management to remain disciplined because Dixon had historically favoured businesses with lower asset intensity, faster capital turns and limited technology risk.

As a result, Macquarie considered large-scale semiconductor manufacturing a less natural fit for Dixon than some other opportunities within its electronics manufacturing business.

Kaynes Technology: Packaging remains the most logical route

Kaynes Technology was rated ‘Neutral’, with a Rs 3,800 target price and an indicated 3% total shareholder return.

Macquarie said management was assessing the economics of ISM 2.0 before deciding whether to expand its semiconductor ambitions. The brokerage viewed packaging as the most natural adjacency, particularly advanced packaging that could complement Kaynes’ existing outsourced semiconductor assembly and test operations in Sanand.

However, Macquarie noted that incentives for assembly, testing, marking and packaging and outsourced semiconductor assembly and test facilities had been reduced to 25-35% from 50% under ISM 1.0. The lower support could raise the investment hurdle for incremental capacity.

Cyient DLM: Less direct exposure to the new semiconductor cycle

Cyient DLM Ltd. remained Macquarie’s weakest-rated stock in the group, with an ‘Underperform’ rating, a Rs 410 target price and an indicated -51% total shareholder return.

Macquarie said the company had not explicitly identified semiconductors as a strategic growth vertical. Management had instead identified artificial intelligence infrastructure, data centres and robotics as key growth themes for FY27-FY29.

While those areas could create indirect semiconductor-related opportunities, Macquarie said Cyient DLM appeared less directly leveraged to ISM 2.0 than peers such as Syrma SGS and Avalon Technologies.

ISM 2.0: Bigger opportunity across equipment, materials and packaging

Macquarie said the new framework was designed around “Goal is domestic capability creation”, rather than manufacturing alone. The eligibility structure requires applicants to be incorporated and headquartered in India, have significant local operations and manpower, and remain Indian-owned and controlled.