Despite good recovery in the market, the condition of EMS shares today remained poor. These shares have declined sharply after the results of the Keyans. Why investors are scared of EMS companies (electronic manufacturing companies for other companies), who were market heroes. Giving information on this, Yatin Mota of CNBC-Awaaz said that the biggest reason for the sharp decline in EMS companies is their expensive valuation. These companies work on low margins and keep a target of high turnover. These companies have run away considerably so far. If we look at their valuation, Ambar FY25 is trading at 78 times the estimated PE ratio. At the same time, Dixon is trading at 94 times, Keyans 128 times, PGEL 82 times and Sirma SGS 54 times.
ROCE of EMS companies (Return on Capital Employed) Low double digit is seen. Ambar is estimated to be 14 percent in ROCE FY25. Dixon’s ROCE can be 39 percent during this period. In FY25, the ROCE of Keyans can be 7 percent and PGEL ROCE can be 19 percent. The ROCE of Sirma SGS is estimated to be 10 percent during this period. That is, on the ROCE front, the condition of almost all companies except Dixon is thin.
Risk factor of EMS companies If you look at, there is a strong competition in electronic manufacturing and room AC segment. If the supply of PCBS is interrupted, the problem will increase. White Goods and Mobile Demand have a slowdown. Seasonal weak demand and dependence on PLI are also a big risk for them.
Why decline in keys
The company has said in its guidance that it is difficult to get an income guidance of Rs 3000 crore. The FY25 income guidance has been reduced from Rs 3000 crore to Rs 2,800 crore. More operating costs will affect the company’s capex margin and cash flow. The stock has declined due to premium valuation.
Why decline in Dixon Tech?
The stock continues in profit after the strong rise so far. The market is unhappy with heavy investment on semiconductor. On Dixon Tech, Jeffers has given a target of Rs 12600 per share, giving the underperform rating. Brokerage says the risk reward of the stock is very bad. It is trading at an expensive valuation of 107 times of FY26 Pe.
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Return in EMS companies
Talking about returns in EMS companies, Amber has given 9 % negative return in 1 month. Similarly, DIXON has broken 18 percent in 1 month. Kaynes has seen a decline of 33 per cent in 1 month. While PGEL is 34 percent broken in 1 month. SYRMA has also decreased by 29 per cent in 1 month.