EMS poised to grow in India amid policy support; JM Financial bets on these 4 stocks for up to 28% upside

The policy initiatives such as Production Linked Incentive (PLI) and Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), cost competitiveness, robust infrastructure, and a skilled labour force are catalysing India’s share in the global EMS or electronic manufacturing  Services.
Domestic brokerage in its report has initiated coverage on the sector as it sees India’s share in the industry to zoom from 2 per cent in FY21 to 7 per cent in FY27.

“Until FY23, most complex Printed Circuit Boards (PCB) were manufactured outside India. In FY23, usage of multi-layer PCBs increased to 55%+ in terms of value vs. just 6% in FY19. We expect with imposing of import duties, to boost component manufacturing; India will accelerate the production of multi-layer PCBs (4-8 layers) which will broaden the total addressable market (TAM) of EMS players by c.INR 300bn and also increase export opportunities,” said the brokerage.

Also, the report noted that the country is making rapid strides in seizing the Rs 1000 billion Indian Outsourced Semiconductor Assembly and Test (OSAT) opportunity. Although this sector typically yields low margins and asset turnover, it shall offer high returns due to the government's incentive of c.75% capital subsidy, added the brokerage.

Further as the brokerage sees significant growth potential for the country’s electronics industry in light of low penetration Levels, rising disposable incomes, improving power availability, increased localization, government Policy Initiatives (like M-SIPS, PLI, PMP, and SPECS), it sees the country to emerge as an attractive manufacturing destination in the world, supporting the objective of “Make in India to Make for the world”.

4 stocks JM Financial turns bullish amid booming EMS space

So, given the huge scope, JM Financial’s Deepak Agarwal and Nilesh Soni are bullish on four stocks and anticipate an  up to per cent upside.