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EMS companies on a good pitch post results

ICICIdirect Research 25 Jul 2025 DISCLAIMER


Dixon - Robust growth with strategic backward integration

Dixon technologies reported revenue of ₹12,836 crore up by 24.7% QoQ and 95.1% YoY wherein mobile & other EMS segment registered a robust growth of 28% QoQ and 125% YoY. Consol EBITDA grew 95% YoY to ₹484 crore, with EBITDA margins flattish at 3.8% on YoY basis and decline of 50 bps QoQ on high base.
About 9.6 mn smartphones and 5.5 mn feature phones were dispatched during the quarter with management guiding for ~11mn+ smart phones in Q2. FY26 volumes expected at 42-43mn units, with a sharp ramp up to 60-65mn in FY27 backed by Vivo partnership.
Currently, value addition in its smartphone vertical stands at ~18% which the company aims to increase to ~35% over next few years. Dixon’s recent strategic developments in the component ecosystem including partnerships with Q-tech (camera and fingerprint), HKC (display), and Chongqing Yuhai (Precision components), underscore its strong ability to make right partnership and execution abilities. We expect these new expansions to be margin accretive and with company’s quasi-captive customer base shall strengthen its competitive presence. EBITDA margin is expected to improve from 3.9% in FY25 to 4.7% in FY27E.
Dixon with its aggressive and yet superior capital allocation strategy has been able to earn RoCE of 35%+. With backward integration, its business model shall be further strengthened alongwith margin improvement. Profits are expected to grow at 66% CAGR over FY25-27E. We value the stock at 63x FY27E its adjusted EPS with target price of Rs 20,000 and maintain BUY rating.
 


Syrma – Margins enriching with better product mix; Components foray to be value accretive

Syrma SGS delivered healthy operational performance. EBITDA grew 93% YoY to ₹86.6 crore with EBITDA margins at 9.2%, up by 534bps YoY while it declined by 245bps QoQ owing to seasonal factors of product mix. Gross margins are consistently around 25% or more vs ~21% earlier.   
In terms of revenue, it was marginally up by 2.1% QoQ and declined by 19% YoY at ₹944 crore, on account of strategic de-growth of low margin consumer segment (-48% YoY to ₹318 cr) by management. High margin verticals including Industrials, automotive and healthcare grew ~25% cumulatively. Consol PAT reported at ₹49.9 crore which increased by 145% YoY.
Company has recently announced a joint venture with a Korean partner - Shinyup electronics to enter the high-potential PCB manufacturing, targeting multi-layer and single-layer PCBs. Indian PCB market is est. to be valued at ~$5 billion, with ~90% of demand met through imports—highlighting a significant opportunity for domestic players. This project is expected to have investment of $91mn (~Rs 775 cr) in phase 1 over 3-5 years of which 35-50% could be subsidised by state government. Potential EBITDA margin of 15–18% is expected including PLI incentives, materially higher than Syrma’s existing level of ~9% alongwith healthy RoCE of 20%. This foray not only bolsters Syrma’s positioning in the EMS value chain but also opens new revenue vertical and enhances margin potential.
Overall, diversified business mix across product categories and geographies positions Syrma SGS to capture both domestic and exports opportunity especially with China +1 gaining momentum. Product mix tilt towards high margin segment is swifter than expected. Venture into PCB manufacturing is expected to drive growth, margin and return ratios over long term beyond FY27E, enabling it to command better valuation. We value Syrma SGS at 47x FY27E PAT to arrive at a target price of ₹ 825. Maintain Buy rating on the stock.

View our research recommendation on Dixon Technologies (India) Ltd Also explore more on Research page

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