5 Fundamentally Strong Electronics Manufacturing Stocks Down up to 50% from Highs

Electronic manufacturing services (EMS) firms in India have carved out a significant role in electronics production, particularly in mobile phones and home appliances.

Currently, this sector is thriving, as companies boost their domestic manufacturing capabilities in line with India's "Make in India" initiative.

The sector's growth is further fueled by the Indian government's push for domestic manufacturing, driven by the China+1 strategy and the Production-Linked Incentive (PLI) schemes.

This initiative has boosted the opportunities for local EMS providers, establishing them as key beneficiaries of this shift.

Major companies in this industry have also excelled in the stock market, with many of their stock prices doubling investors' wealth over the past two years.

However, recent market dynamics have been harsh, resulting in a sharp correction. The broader market is experiencing greater turmoil than the benchmark indices, with some individual stocks facing significant declines.

Even fundamentally strong EMS stocks have not been immune, with corrections up to 50% from their peaks.

This situation presents an opportunity for long-term investors who may have missed out on the previous rally.

Keeping that in mind, we highlight five fundamentally strong EMS stocks that have seen significant declines from their peaks and merit further investigation...

These stocks are filtered using Equitymaster powerful stock screener.

#1 Cyient DLM

First on the list in Cyient DLM.

Cyient DLM is a leading player in the EMS sector, focusing on design-led manufacturing. As a subsidiary of midcap-IT major Cyient, it leverages parent company's global expertise and reputation.

Cyient DML targets high-entry barrier industries with strict quality and qualification standards, such as aerospace, defence, medical technologies, industrial, and railways.

Its involvement spans the entire electronics production lifecycle-from product design to manufacturing, testing, and supply chain management.

The aerospace and defence sector accounts for 86% of total revenue. It produces cockpit display units, flight management systems, surveillance radar systems and sensors, and navigation systems, among other products.

The remaining 14% comes from medical technologies, industrial, and automotive.

Cyient DLM earns 77% of its revenue from manufacturing printed circuit board assembly, with the balance coming from box build, cables, and precision machining.

Additionally, Cyient DLM generates 54% of its revenue from the domestic market and 46% from exports to Europe, North America, China, and Japan. It maintains long-term relationships with clients, averaging 11 years in tenure.

In terms of financials, Cyient DLM's revenue for the September 2024 quarter rose 33.4% year-on-year (YoY) to Rs 3,895 million (m). The revenue growth was driven by defence (up 82% YoY) and aerospace segments (up 20% YoY).

The company's profit after tax (PAT) rose just 5.5% to Rs 155 m, and its net profit margin dipped to 4%. At the end of the September quarter, its order book stood at Rs 19.8 bn, which declined 13% YoY.

Though the Middle East conflict has negatively impacted its recent performance, the management has maintained its guidance of about 30% revenue growth going forward. It also expects the subdued order book growth to pick up in Q4FY25.

Additionally, it has recently acquired Altek Electronics, a company in the same sector as Cyient DLM. This acquisition is expected to enhance the company's earnings per share (EPS) starting in FY26. Moreover, it will improve client proximity by providing access to several Fortune 500 clients.

Here's how the stock price has moved in the past year -

Cyient DLM Share Price Performance

The stock price is currently trading at a 33% discount to its all-time high of Rs 884, reached in February 2024.

To know more, you can check out its financial factsheet.

#2 IKIO Lighting

Next on the list is IKIO Lighting.

IKIO Lighting is one of India's leading Original Design Manufacturers (ODMs). It designs, manufactures, and supplies products sold under customers' brands.

In the last five years, IKIO Lighting has served over 900 domestic customers and 16 international customers.

It manufactures LED lighting, refrigeration lights, Acrylonitrile Butadiene Styrene (ABS) piping, solar panels, lithium batteries, and USB chargers.

IKIO has a diversified product offering that includes over 1,000 stock-keeping units. As of the FY22, LED lighting contributes 87% to its revenue, with the balance coming from ABS pipes and others.

80% of its revenue comes from the domestic market, while the remaining revenue comes from exports, including the US and the UAE. Its US-based subsidiary has recently started generating revenue.

This business has high concentration risk with its largest customer Signify (Philips), which has a 50% market share in India's decorative lighting category, contributing nearly 50% of its revenues.

Its revenue, during the second quarter of FY25, increased 6% to Rs 1,250 million (m), driven by shifts in product categories and the discontinuation of older SKUs.

Meanwhile, profitability fell 29% to Rs 129 m, primarily due to increased depreciation linked to the new facility's commercialisation starting May 2024.

IKIO has shown strong overall performance despite minor underperformance in recent quarters, which the company anticipates will improve given the growth levers in place.

It is aggressively adding a greenfield capacity of 500,000 sq. ft. Of this, block 1, with a 40% area, has already started production, and 40% completion is expected in March 2025. The remaining 20% will also be operational in the next few quarters.

Through this expansion, IKIO plans to expand its export business and develop new products for the domestic market.

The company has also begun selling two new product categories: hearables (such as earphones) and wearables (including smartwatches) and has already received orders from 7 to 8 leading brands in the domestic market.

In addition, it has started supplying its industrial and solar products to energy service companies.

The company forecasts revenue growth of 20-25% in FY25 and will expect to maintain this growth with upcoming capacities and new product categories in the coming years.

Here's how the stock has moved in the year gone by...

IKIO Lighting Share Price Performance

The stock price is currently trading at a 45% discount to its all-time high of Rs 463, reached in June 2024.

To know more, you can check out its financial factsheet.

#3 Exicom Tele-Systems

Next on the list is Exicom Tele-Systems.

Exicom is a leader in electric vehicle (EV) charging infrastructure, battery management systems, lithium-ion battery packs, and other advanced power electronics equipment.

It supports industries like telecommunications, electric mobility, renewable energy, and energy storage solutions, contributing to India's green energy transition.

It is an undisputed leader in residential chargers, with a market share of 60% and 25% in public chargers. At the end of FY24, it had over 75,000 chargers installed across 400+ cities in India.

The company generates 70% of its revenue from critical power solutions, while the rest comes from the EV charger business. It generates 80% of its revenue from the domestic market and the rest from exports.

Talking about the financials, the company's revenue fell 19.5% YoY to Rs 1.5 bn during the second quarter of FY25, while the company incurred a loss of Rs 0.2 bn.

This poor performance can be attributed to the wait for new models and the slowdown in electric four-wheeler sales due to charging infrastructure.

The management expects this to improve in the second half of the financial year, with demand for domestic and public chargers rising again.

The company has won an order for power systems and batteries from a leading Indian telco. It has also acquired new customers in the Philippines, and also a major tower company in Africa for power systems in 9 countries.

It is also expanding into data center batteries and has received pilot orders from companies. Moreover, Exicom's consortium partner has also won big business as per the tender result of Bharat-Net III. It expects business of over Rs 10 bn over the next 3 years.

The company is currently investing in R&D for next-generation chargers and power conversion devices. It plans to increase its capacity from 42,000 AC chargers to 180,000 AC chargers in 2 phases and is developing an integrated manufacturing complex in Hyderabad for all product lines.

The company is well-positioned to capture the growing market, driven by government policies to accelerate EV adoption. It will directly result in a positive outlook for EV charger sales, in which Exicom is a market leader.

Here's how the stock has moved in the past 1 year -

Exicom Tele-Systems Share Price Performance

The stock price is currently trading at a 45% discount to its all-time high of Rs 463, which was reached in June 2024.

To know more, you can check out its financial factsheet.

#4 Whirlpool

Next on the list is Whirlpool of India.

Whirlpool of India, a subsidiary of the Whirlpool Corporation, is a leading manufacturer and marketer of home appliances in India. It remains a trusted name in the Indian home appliances market.

The company offers a wide range of products, including refrigerators, washing machines, air conditioners, microwaves, dishwashers, and kitchen appliances. It operates through a robust network of manufacturing facilities, service centres, and retail outlets across India.

It derives 59% of its revenue from the sale of refrigerators, 27% from washing machines, 6% from air conditioners, etc. 95.8% of its revenue comes from the domestic market, while 4.2% from the rest of the world.

Whirlpool, despite a strong brand, has not performed well in the stock markets over the past few years. The company has struggled with stagnant revenues, and declining profitability and margins due to intense competition.

As a result, its stock price is trading below the all-time high levels seen in early 2021. However, its share price has jumped of late due to improving performance in the first two quarters of FY25.

Its consolidated revenue grew 12.6% YoY to Rs 17.1 bn during the second quarter of FY25, with a PAT of Rs 0.5 bn, which also grew 63.5%. Its EBITDA grew 18.8% to Rs 0.9 bn.

The company has started seeing improvement in product demand with strong volume growth in refrigerators and washers compared to last year.

Moreover, its more premium product mix also helped drive price increases. This, coupled with cost optimisation, has helped it record improved profitability.

Whirlpool has made a strategic shift towards premiumisation, focusing on increasing new offerings in the premium segment. This has led to good results in the last 12 months.

It has also strengthened its R&D, focusing on sustainable features. Additionally, it has increased its product launches to meet demand in tier 2 and tier 3 cities, which can help it sustain growth.

Here's how the stock has moved in the past 1 year -

Whirlpool of India Share Price Performance

The stock price is currently trading at a 30% discount to its 52-week high of Rs 2449, reached in October 2024.

To know more, you can check out its financial factsheet.

#5 Symphony

Next on the list is Symphony.

Symphony provides residential mobile commercial packaged and central air-cooling solutions for domestic and industrial customers in 60 countries across the globe.

It is engaged in the manufacturing and trading of residential, commercial, and industrial air coolers in the domestic and international markets. It is the largest air cooler manufacturer in the world.

Symphony's products include household coolers products, commercial coolers, large space venti-cooling, and tower fans.

Coming to its financials, Symphony's consolidated revenue rose 14.5% YoY to Rs 3.2 bn during the second quarter of FY25, supported by strong domestic sales.

75% of this revenue came from the domestic market, which saw strong growth of 24.5% YoY to Rs 2.4 bn, while international revenue declined 8.4% to 0.8 bn.

The company's PAT surged 60% to Rs 0.6 bn, while EBITDA surged 56% to Rs 0.6 bn. The robust revenue growth, and optimised cost structure, helped its margin to expand to 20.3%.

The company is expanding aggressively with new product launches. It has launched 17 air cooler models. The company expects this to further increase demand for its products, driving its revenue growth in the coming quarters.

In addition, Symphony has also expanded into the water heater market, initially targeting select segments. The company expects this segment to do well given the encouraging response from trade partners.

On the international front, its subsidiary CT Australia has diversified into the B2C product range, which is also expected to drive revenue growth.

The management expressed confidence in future growth given the increasing heat intensity, expecting a double-digit CAGR in India driven by market expansion and product innovation.

Here's how the stock price has moved in the past 1 year -

Symphony Share Price Performance

The stock price is currently trading at a 32% discount to its 52-week high of Rs 1,881, reached in October 2024.

To know more, you can check out its financial factsheet.

Snapshot of EMS Stocks on Equitymaster's Stock Screener

Here's a table showing the exhaustive list of EMS stocks on our stock screener.

Conclusion

The EMS sector is on track for significant growth in the coming years. This growth will likely be fueled by rising domestic manufacturing as companies seek to lessen their reliance on imports, with increasing export opportunities.

The government's proactive measures, including the PLI schemes and the Semicon India program, play a key role in fostering electronic manufacturing nationwide.

The addressable EMS market in India is anticipated to experience a remarkable CAGR of 27%, increasing from US$ 40 bn in 2023 to US$ 100 bn by FY27.

The growth opportunities will fortify the position of EMS companies in India, establishing the sector as a fundamental part of the country's manufacturing landscape.

Having said that, every sector has its own risks and rewards, which you should evaluate before making any investment choices.

Investors should proceed with caution and conduct thorough research into a company's financials, capabilities, and corporate governance.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...