Your phone was probably assembled in India. But was it built here? That’s the question India’s electronics industry is now trying to answer. This also puts three stocks in the spotlight – Kaynes Technology, Dixon Technologies and Syrma SGS Technology.
Global brokerage Jefferies believes the government’s latest incentives could change the earnings opportunity across the electronics manufacturing services (EMS) space, with component makers potentially gaining an edge over assembly-focused companies.
The brokerage has a ‘Buy’ rating on Kaynes Technology, while Dixon Technologies and Syrma SGS Technology carry ‘Hold’ ratings.
Here are key details on which stock the brokerage is preferring and the investment rationale behind it
From assembling phones to making components
India’s electronics production has more than doubled in five years, rising from around Rs 5.5 lakh crore in FY21 to Rs 12.1 lakh crore in FY26.
Mobile phones account for nearly half of this production. But domestic value addition remains below 15%.
The brokerage house Jefferies in its report said, “India is embarking on a stepwise approach for indigenisation.”
The Mobile Production-Linked Incentive (PLI) scheme, covering FY21-FY26, helped India assemble almost 99% of mobile phones domestically. However, the brokerage believes the next phase will focus more on components.
The Electronics Components Manufacturing Scheme (ECMS) aims to build this missing supply chain.
ECMS could open a new opportunity
So far, 106 projects have been approved under ECMS, against 249 initial applications. Around 38 plants have already started production, while another 16 projects are at advanced stages of construction or machinery installation.
The approved investment is around Rs 69,500 crore across 14 states.
Printed circuit boards (PCBs) could become one of the biggest opportunities. Jefferies estimates the PCB market relevant to this opportunity at around $7 billion, with 85-90% currently dependent on imports.
The brokerage expects ECMS to address around 50% of the mobile bill of materials (BoM) by the end of its six-year tenure.
It said, “Prefer Component plays vs. Assembly (DIXON).”
Why Kaynes gets the top spot
Jefferies has a ‘Buy’ rating on Kaynes Technology and prefers it over the other two stocks.
The brokerage believes companies involved in components could benefit more as India increases domestic sourcing.
Foreign technology partnerships could also help Indian companies bridge existing capability gaps. Jefferies cited arrangements such as Dixon-HKC and Syrma-Shinhyup as examples.
In its stock preference, Jefferies said, “We prefer Component plays (KAYNES; Buy; 55x 1-Y fwd) vs Assembly OEM (DIXON; Hold; 67x).”
Dixon: Earlier beneficiary, new competition ahead?
Dixon Technologies remains closely linked to India’s mobile manufacturing expansion. The company was a key beneficiary of the earlier Large-Scale Electronics Manufacturing (LSEM) PLI scheme.
But the new Mobile Production Manufacturing Scheme (MPMS), also referred to as Mobile 2.0, could bring more competition.
Jefferies expects mobile production to rise to around Rs 39 lakh crore under MPMS, compared with roughly Rs 25 lakh crore under the earlier scheme.
However, the brokerage believes more players could qualify this time.
It therefore has a Hold rating on Dixon, with the stock trading at around 67 times one-year forward earnings.
Syrma SGS: Strong rally raises the bar
Jefferies has also assigned a ‘Hold’ rating to Syrma SGS Technology. The brokerage noted that the stock has gained around 105% year-to-date, while trading at about 57 times one-year forward earnings.
Jefferies said, “we recommend prudence in Syrma (Hold, 57x) post +105% rally YTD.”
MPMS vs ECMS: What changes for investors?
The two schemes target different parts of the electronics ecosystem.The Electronics Components Manufacturing Scheme (ECMS) is aimed at developing domestic component manufacturing, while the Mobile Production Manufacturing Scheme (MPMS) focuses more on mobile production, exports and value addition.
Jefferies estimates EMS companies could deliver an average 27% CAGR in EPS between FY26-29. But execution will remain the key factor.
Disclaimer: This article is based on research reports from one or more brokerage firms and is for informational purposes only. The views, target prices, and recommendations expressed are those of the respective brokerage firms and do not reflect the official policy or position of Financial Express. This should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor before making any investment decisions.