The share prices of electronic manufacturing services (EMS) companies had fallen sharply by the end of 2025. Shares of Dixon, Kaynes, and PG Electroplast have contributed significantly to the fall. The correction is a classic example of what happens when a stock moves above its fundamentals in a euphoric sector rally.
That said, long-term sectoral tailwinds remain, including import substitution, increased penetration in electronics, the China+1 theme, and the government’s continued focus on Make in India. According to CareEdge Ratings, under India’s Production Linked Incentive (PLI) Scheme, the sector has seen actual investment of around ₹2 lakh crore and incremental production of over ₹18.7 lakh crore by September 2025.
The large-scale EMS sector received the highest allocation of ₹38,645 crore, making it the largest beneficiary under the scheme. Next, the automobile and auto components sector received ₹25,938 crore, reflecting the government’s efforts to strengthen domestic manufacturing and supply chain.
This is where these two EMS companies have made their presence felt. Their focus remains on industrial, automotive, and medical devices, segments that offer pricing discipline. This, coupled with non-euphoric valuations, appears to have shielded them from the recent market crash.
But are they worth considering at the current valuation? Let’s take a look…
1-Year Share Price of Leading EMS Companies
#1 Syrma SGS Technology: Margin-led shift underway
Syrma is a prominent player in the Electronic System Design and Manufacturing (ESDM) services sector. The company provides a broader suite of EMS solutions, including PCBA (Printed Circuit Board Assembly), comprehensive Box Build solutions, and tailored End-of-line Tester Development services.
It’s a key player in the Radio Frequency Identification (RFID) space, offering durable RFID tags and inlays for critical applications such as asset tracking and access control. It also provides Critical Communication Solutions for public safety, oil and gas, medical devices, and paramilitary sectors. In comparison to peers, Syrma hasn’t fallen much.
Operating Metrics Strengthen Despite Topline Decline
Revenue in H1FY26 increased by 4.4% year-on-year to ₹2,093 crore, driven by order-book execution. EBITDA (earnings before interest, tax, depreciation, and amortization) increased by 60% to ₹226.6 crore, while margins rose 370 basis points to 10.7%. Net profit nearly doubled to ₹116.3 crore.
The Pivot: Why Syrma is Trading Revenue for Margins
The revenue mix is gradually shifting from consumer to higher-margin industrial and automotive segments. While this shift has reduced revenue growth currently, improving margins augurs well for the company. Consumer vertical revenue declined 23% to ₹683.4 crore, bringing down its contribution from 40% to 32%.
Shifting Revenue-Mix to Higher Margin Business
Industrial segment revenue rose by 20%, accounting for 26% of the total business mix. This is followed by the automotive segment, which also rose by 24%, representing 24% of the revenue mix. Other verticals, like healthcare, grew by 21% and exports by 35%.
₹5,800 Crore Visibility: Decoding the 1.5-Year Order Book
The order book stood at about ₹5,800 crore, providing strong visibility of around 1.5 years. The company is sticking to its guidance of about 30% organic revenue growth for FY26. Management expects FY27 to see higher growth than FY26, provided global tariff conditions are clarified.
After reporting a 10.7% margin in H1FY26, Syrma expects to exceed its full-year guidance of 8.5-9%. The company expects increased revenue and EBITDA margins in FY27. Furthermore, it expects export revenue to exceed ₹1,000 crore this fiscal year.
Beyond PCBA: Scaling the Defence and Solar Growth Engines
The company’s outlook is influenced by new ventures and acquisitions aimed at diversifying its portfolio. Beyond the core industrial and automotive sectors, emerging themes like defence, PCB manufacturing, and solar energy are expected to drive future growth.
Diversifying the Defence and Energy Portfolios
In the Defence segment (Elcome Acquisition), Syrma expects to consolidate Elcome’s financials starting in Q4FY26. Management aims to grow this business from its current ₹200 crore level to ₹300-350 crores within the next 2 to 3 years by targeting larger projects and tenders.
PCB manufacturing is a key driver of long-term growth. Trial production is expected to begin by Q3FY27. With a total planned investment of ₹1,500 crore, management estimates revenues of up to ₹2,500 crore upon full operation. Also, Syrma expects higher revenue traction in the coming year as it expands KSolare’s portfolio from rooftop solar into grid and microinverters.
Beyond the newer vertical, growth in automotive will be fueled by the adoption of electric vehicles and increased electronic content in traditional vehicles. Industrial growth will be driven by data centers and power electronics, both in India and globally. Syrma is also executing smart meter contracts and expects to report full-year revenue of ₹300+ crores from the smart metering business.
#2 Avalon Technologies: Precision-led global EMS scaling
Avalon Technologies is one of India’s leading fully integrated EMS providers, maintaining a global delivery footprint. It operates as a “one-stop shop” for all EMS needs, providing vertically integrated solutions that include PCB design and analysis, cable assembly, wire harnesses, sheet metal fabrication, machining, injection-molded plastics, and magnetics.
Avalon specializes in high-precision, long-term product lifecycle industries. It distinguishes itself from consumer-focused EMS peers by serving segments like Aerospace, Defence, Clean Energy, and Railways. Mobility and transportation accounted for 27% of revenue, followed by industrials (34%), communication (10%), clean energy (18%), and medical and others (11%).
Avalon Revenue-Mix
Strategic Moat: The US Dual-Shore Edge
A core differentiator for Avalon is its optimal dual-shore presence. It is notably the only Indian EMS company with manufacturing facilities in the United States. It has operating units in Atlanta and Fremont, as well as a significant manufacturing base in Chennai and Bengaluru.
This model allows Avalon to onboard U.S. customers to manage local requirements and tariff exposures (recovering over 99% of the tariffs from customers) before transitioning production to its cost-effective, scalable Indian base. As of Q2 FY26, India-based manufacturing accounted for 81% of total revenue, while U.S. operations contributed 19%.
Moving Up the Value Chain with Box Builds
Avalon offers a range of services that enable deep up- and cross-selling within its customer base. These vertically integrated capabilities include PCB design and analysis, manufacturing services, and box build and system integration. Box build and system integration accounted for 53% of total revenue in H1FY26.
The company serves a diversified and sticky customer base across multiple “sunrise” and established sectors. Avalon is currently leveraging three distinct growth engines to sustain its momentum. In existing businesses, growth will be driven by long product lifecycles and recurring revenue from mission-critical products such as energy storage systems.
Scaling the Semiconductor Business
It is also expanding into advanced technology segments. Avalon has entered the semiconductor equipment space, partnering with a leading global major to develop Industry 4.0-compliant box-build systems. Prototyping has commenced, with a volume ramp-up expected in FY27.
The Kavach & Locomotive Catalyst
Commercial production for the Kavach railway safety system is on track to begin in H2 of FY27. Additionally, production for locomotive engine sub-systems is scheduled to start in H2 of FY26. The company expects a production ramp-up for aircraft cabin sub-assemblies in the first half of the next calendar year.
Avalon is front-loading investments to ensure it can meet the expected surge in demand. The company’s export-focused Chennai plant is currently ramping up. Furthermore, phase 2 of its brownfield expansion in Chennai was expected to be completed by Q3FY26.
Management anticipates that operating leverage will become visible toward the end of FY26 and carry into FY27 as volumes scale. Scaling U.S. operations is specifically expected to support margin improvement in the latter half of the current year.
The company has demonstrated strong and consistent execution, marking its fifth consecutive quarter of sequential improvement. Revenue rose by 48.7% year-on-year to ₹706 crore in the H1FY26, while EBITDA expanded by 98.5% to ₹68 crore. Margins increased by 243 bps to 9.7%, leading to a 158.3% surge in net profit to ₹39 crore.
The ₹3,031 crore Order Book
As of 30 September 2025, the order book stood at ₹1,863 crore, with an average execution period of 14 months. In addition, it has an additional ₹1,168 crore in long-term contracts with an execution period of 15-36 months.
The company is also focusing on normalizing its inventory levels, which were increased to support incoming supplies. In the long term, management aims to double revenue every 3 years, targeting a doubling from FY24 levels by FY27, then doubling again in the next 3 years.
The Verdict: Quality vs. Valuation
Syrma’s return ratios are currently depressed due to a shift in its business model toward high-margin businesses. Return on capital employed (RoCE) and return on equity (RoE) are 11.7% and 9.5%, respectively, which could improve as the shift plays out. It trades at a price-to-earnings multiple of 59.2x, not cheap but not euphoric either.
| Peer Comparison (X) | |||||
| Company | P/E | 3Y Median P/E | Industry Median P/E | RoCE (%) | RoE (%) |
| Syrma | 59.2 | 71.0 | 32.1 | 11.7 | 9.5 |
| Avalon | 70.0 | 79.8 | 28.0 | 12.8 | 10.4 |
| Dixon | 50.4 | 117.9 | 26.1 | 40.0 | 32.8 |
| Kaynes | 63.9 | 119.9 | 32.1 | 14.3 | 10.7 |
| PG Electroplast | 65.7 | 56.7 | 26.1 | 19.4 | 14.9 |
| Source: Screener.in (As of 16 January, 2026) | |||||
Avalon’s return ratios are a little better than Syrma’s. However, it is now trading at a higher multiple than its peers in the EMS space as well. The EMS correction has reset expectations after a euphoric rally, but it has not altered the story. Syrma and Avalon are consciously trading near-term growth for higher-quality, margin-led businesses. Yet, valuations remain demanding.
Disclaimer:
Note: Throughout this article, we have relied on data from http://www.Screener.in and the company’s investor presentation. Only in cases where the data were unavailable have we used an alternate, widely accepted, and widely used source of information.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.
About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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