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EMS industry records strong Q2 FY24 growth despite seasonal weaknesses

The July-September quarter is a seasonally weak period for the EMS industry. However, Q2 FY24 witnessed a strong growth trajectory with minor roadblocks in the form of margin pressure due to company-specific factors.

In this report, we present insights based on Q2 FY24 results and management commentaries of major EMS players – Kaynes Technology India Ltd., Avalon Technologies Ltd., Syrma SGS Technology Ltd., Cyien DLM Ltd., Data Patterns India Ltd., Dixon Technologies India Ltd. and Amber Enterprises India Pvt. Ltd.

The Q2 FY24 performance was characterised by strong revenue growth but minor short-term margin impact due to company-specific business adjustments to sustain such growth trends for the long term.

Among EMS players, Cyient DLM posted the highest revenue growth (up 72% YoY), while Kaynes and Syrma recorded the highest order inflow (up 2.4 times/2.2 times YoY).

The EMS basket witnessed margin pressure, with Cyient DLM/Avalon reporting a contraction of 580 basis points/540 basis points due to lower raw material costs in the base quarter and adverse operating leverage, respectively.

Data Patterns registered the highest margin expansion (340 bp YoY).

The growth momentum is expected to pick up pace in H2 FY24 (seasonally better half), led by strong execution of the large order book as on H1, coupled with continued order inflows from the existing and newer end-user industries. Bloomberg

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