Kaynes shares have tumbled 53% from 52-week high, while PG Electroplast and Dixon are down 42%. Epack Durable has shed 50%, Amber 29%, and Syrma SGS 22%. What was a broad-based rally has turned into a savage correction, forcing a hard reset across the electronics manufacturing services (EMS) space.
Multiple catalysts have converged to trigger the rout. A massive surge in memory chip (DRAM) prices is hammering smartphone demand and squeezing margins for Dixon Technologies, India’s largest Android handset maker, which produces devices for Xiaomi, Motorola, Vivo, Oppo, Transsion and Realme. Regulatory overhang around pending government approvals for joint ventures threatens volumes and profitability from FY27 onwards. Softer seasonal demand in consumer durables has added pressure, while the looming March deadline for the mobile PLI scheme, set to expire this month, casts a shadow over future growth visibility.
Company-specific troubles have deepened the pain. Kaynes has faced scrutiny over disclosure lapses and stretched working capital, with receivables ballooning in recent quarters. PG Electroplast suffered a weaker-than-expected summer season. For Dixon, market trackers point to three key risks: potential volume and margin hits from FY27 due to pending joint venture approvals, the memory price surge denting smartphone demand, and expectations of weak December quarter growth.
Yet even after the steep drawdown, the question of whether these stocks now represent value remains fiercely contested.
JP Morgan struck a contrarian note on Kaynes last month, calling the stock “below bear case” and the “cheapest on PEG” in its coverage universe at 0.7x versus peers’ average of 1x. “There has been no change in fundamentals on revenues and margins, but one of the key concerns on the stock has been stretched working capital and receivables post 2Q,” the firm noted, maintaining an overweight rating with a price target of Rs 7,550. It expects “improving receivables and NWC over the next two quarters to be key drivers of the stock.”
Sunny Agrawal, Head of Fundamental Research at SBI Securities, acknowledged the damage but defended the long-term thesis. “Yes, long term growth potential is intact. Individually, each of the businesses are facing short term headwinds,” he said, citing Dixon’s memory price and volume issues, PG Electroplast’s weak summer season, and Kaynes’ disclosure and cash flow challenges. Post-correction, Agrawal sees better valuations emerging. “We prefer stocks catering to consumer durable and PCB segments like Amber, Syrma, PG Electroplast, EPack durable etc,” he added.But Om Ghawalkar, Market Analyst at Share.Market, urged caution against rushing in. “Although EMS stocks like Kaynes, Dixon, and PG Electroplast have corrected 35–52% from their peaks, the sector may not be undervalued yet,” he warned. “While the long-term growth story remains intact, investors should not assume the recent dip equates to a compelling buy signal.”
Ghawalkar pointed to still-elevated valuations despite the selloff. “Rounded trailing multiples for leading EMS names continue to trade well above broader manufacturing averages, reflecting high expectations of sustained execution and growth,” he said. With return on capital employed (ROCE) still normalising amid heavy PLI-driven capex, he argued that near-term earnings delivery will be critical to justify current multiples.
Operationally, EMS players have continued to perform, particularly in the seasonally strong March quarter. “Over the past several years, Q4 has consistently seen sharp revenue acceleration, driven by seasonality in consumer electronics, fiscal year-end order push from clients, and PLI-linked capacity ramp-ups,” Ghawalkar noted. Peak capacity utilisation in Q4 often hits 80-90%, compared to much lower off-season levels, while improving product mix and original design manufacturing (ODM) exposure have supported margin expansion across smart meters, electric vehicle components and industrial electronics.
Still, he advocated patience. “For retail investors, rather than chasing the correction, it may be wiser to wait for upcoming earnings to validate growth and margin assumptions, while keeping EMS exposure within overall portfolio allocation,” Ghawalkar said.
The long-term India electronics manufacturing story, underpinned by policy support, export diversification and global supply-chain realignment, remains compelling across consumer, industrial and automotive electronics. But rising competition and execution risks mean the next phase of returns will be far more selective than the broad rally of recent years.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)