Motilal Oswal highlights a shift in India’s electronics manufacturing services industry towards higher-value work, driven by defence, aerospace, EVs, and energy infrastructure, with key stock recommendations pointing to significant upside.
Motilal Oswal remains constructive on India’s electronics manufacturing services sector, saying the industry is still early in a broader shift towards higher-value, more technically demanding work. In a recent note, the brokerage argued that EMS companies are benefiting from outsourcing, localisation and stronger demand from areas such as defence, aerospace, electric vehicles, clean energy and data-centre infrastructure.
The report sees the sector moving beyond low-margin, high-volume assembly into businesses that need more engineering, testing and system integration. Motilal Oswal expects its EMS coverage universe to deliver strong growth through FY28, with revenue, earnings before interest, tax, depreciation and amortisation, and adjusted profit after tax all rising sharply. Separately, Motilal Oswal has said the sector could also gain from the government’s production-linked incentive programme and a push to source more components locally.
Among its preferred names, Kaynes Technology stands out as the brokerage’s highest-upside pick. Motilal Oswal kept a Buy rating and set a target of Rs 5,000, implying 38.5% upside. The firm said Kaynes had an order book of about Rs 8,900 crore as of June 2026 and has been stockpiling inventory to guard against supply shortages, with some components still facing lead times of six to eight months. The brokerage expects working-capital pressure to ease as supplies normalise and inventory turns into revenue.
Avalon Technologies also drew a Buy rating, with Motilal Oswal assigning a target of Rs 2,740, or nearly 20% upside. The company’s order book was Rs 3,470 crore as of June 2026, including a short-term book of Rs 2,210 crore executable within 14 months. Motilal Oswal said Avalon is broadening beyond its core businesses into semiconductor equipment, high-voltage direct current systems, energy storage and medical applications. It also noted that aerospace now accounts for about 8% of revenue, up from roughly 3% historically, while railways contributes around 15%.
Cyient DLM and Syrma SGS Technology were also among the brokerage’s Buy-rated picks. Cyient DLM has a target of Rs 1,030, while Syrma SGS has a target of Rs 2,000. Motilal Oswal said Cyient DLM’s order book reached Rs 2,600 crore as of June 2026, with aerospace making up about 42% of revenue and new demand emerging from semiconductor capital equipment, AI infrastructure and robotics. For Syrma, the brokerage pointed to an order book of Rs 6,770 crore, with about Rs 5,400 crore expected to be executed over the next 12 months, alongside expansion into healthcare, defence, maritime and data-centre power management.
Data Patterns was the lone Neutral rating in Motilal Oswal’s coverage set. The brokerage’s target price of Rs 4,000 still implies upside, but the note said margin pressure remains a concern after EBITDA margin fell by about 450 basis points year on year in the first quarter. The company’s order book stood at Rs 930 crore as of June 2026, with another Rs 1,730 crore of contracts awaiting final approval, and around Rs 2,000 crore of single-vendor opportunities under pursuit.
The broader message from the report is that EMS in India is no longer just a play on consumer electronics. According to Motilal Oswal, demand is increasingly being shaped by aerospace, defence, railways, medical equipment, semiconductor tools and energy infrastructure, with AI-related data-centre build-outs adding a further layer of opportunity. In that setting, the brokerage sees Dixon Technologies and Amber Enterprises as additional beneficiaries, both of which remain on Buy ratings.
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