Dixon, Avalon to Kaynes: Which EMS stocks to buy post Q3 results? JM Financial shares top bets

Companies in the EMS space reported a healthy set of numbers for the December quarter (Q3FY25). Dixon saw the highest year-on-year (YoY) revenue growth at 117%, followed by PG Electroplast at 82%. 

In terms of PAT, Avalon Technologies was the standout performer, growing 3.6x. Syrma SGS recorded the lowest YoY revenue growth at 23%, but a 137% increase in PAT, driven by a lower share of its low-margin business, which excited the Street, said domestic brokerage firm JM Financial. 

For Kaynes, it was a relatively muted quarter, with revenue and PAT growth of 30% and 47%, respectively. Meanwhile, for Cyient DLM, a YoY contraction in the order book despite an acquisition remained a key concern.

JM Financial favours Dixon, PG Electroplast, and Avalon in EMS space

Following the December quarter results, JM Financial remains bullish on the EMS space but is selective, with its top picks being Dixon Technologies, PG Electroplast, and Avalon Technologies.

Dixon Technologies: The brokerage expects the company’s growth to be driven by the execution of business from customers acquired over the past 15 months. While Xiaomi, Realme, Motorola, and IsmartU are likely to ramp up, the recently acquired Vivo should contribute from Q2FY26. Additionally, it noted that the company is likely to benefit from backward integration initiatives.

Over FY24-27E, JM Financial estimates a revenue, EBITDA and PAT CAGR of 59%, 59% and 66% respectively, driven by strong growth in the mobile business and backward integration initiatives fructifying into stronger margins. It valued Dixon at 66x FY27E EPS, in line with the average 1-yr forward multiple, and arrived at a target price of ₹19,000, maintaining a ‘Buy’ rating on the stock.

PG Electroplast: The brokerage believes the company’s growth will be driven by its RAC (room air-conditioner) business, supported by industry tailwinds and new capacities. The commencement of compressor manufacturing is expected to strengthen its competitive position and improve margins.

Additionally, the brokerage said the company’s foray into washing machines (already commenced), televisions, IT hardware, and a contract with Whirlpool (manufacturing to begin by March 2025) should further boost growth. It factors in an FY24-27E EPS CAGR of 60% with an average RoE of 16% and maintains a ‘buy’ rating on the stock with a target price of ₹950 per share.

Avalon Technologies: Avalon saw a rebound after several weak quarters caused by destocking in the US. The brokerage noted that revenue from US customers saw YoY growth of 27% in 9MFY25 and 59% in Q3FY25. Efforts to shift production to India (low-cost arbitrage) are also yielding results, as India’s manufacturing revenue share increased to 88%, up from 77% YoY.

The brokerage highlights the company’s industry-highest gross margin, which it believes is a testament to its capabilities. It estimates an FY24-27E EPS CAGR of 70% with an average RoE of 12%. It also underscored that Avalon is the only EMS player with a manufacturing base in the US, positioning it as a potential beneficiary of Trump’s proposed policies aimed at boosting domestic manufacturing in the US.

As a result, JM Financial rolls forward its valuation to March 2027E (from September 2026E earlier) and maintains a ‘Buy’ rating, with a revised target price of ₹840 per share.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.