EMS Sector Shows Clear Divergence as Dixon and Syrma Report Contrasting Q3 Results
The December-quarter financial results from two prominent electronics manufacturing services (EMS) companies in India have revealed a growing divergence within the sector. While Dixon Technologies faced significant pressure due to its reliance on mobile device manufacturing, Syrma SGS demonstrated remarkable resilience through its focus on industrial and export-led segments.
Dixon Technologies Faces Sequential Decline
Dixon Technologies reported operating revenue of ₹10,672 crore for the third quarter of fiscal year 2026, representing a substantial 28% sequential decline. The company's net profit fell even more sharply, dropping 57% sequentially to ₹321 crore. This performance significantly missed street estimates, as a Bloomberg consensus of 20 analysts had expected the company to report consolidated revenue of ₹11,590 crore.
The primary driver behind this decline was a slowdown in manufacturing across multiple product categories including mobile phones, smartwatches, audio products, laptops, and telecom hardware. Revenue from these segments dropped 27% sequentially to ₹9,750 crore, highlighting the vulnerability of companies heavily dependent on consumer electronics markets.
Syrma SGS Delivers Strong Performance
In stark contrast, Syrma SGS reported a 10% sequential increase in its December operating revenue, reaching ₹1,264 crore. The company's net profit crossed the ₹100 crore mark for the first time, growing an impressive 66% sequentially to ₹110 crore. This performance exceeded analyst expectations, as 16 analysts polled by Bloomberg had anticipated revenue of ₹1,185 crore.
Managing director Jasbir Singh Gujral attributed this strong performance to robust exports in high-margin segments such as automotive electronics, medical electronics, and defence technologies. The company also achieved operational cash flow positivity during the December quarter and expects further improvement in net operating cash flow by March 2026.
Market Response and Strategic Investments
Investors responded positively to Syrma SGS's results, with the stock rising 5.6% on Friday following the earnings announcement. Dixon Technologies, however, received a muted response with its shares gaining only 0.35% from the previous close, while the broader BSE Sensex declined 0.48%.
Both companies are actively investing in capacity expansion to strengthen their market positions. Dixon Technologies is building new facilities for camera and display modules, while Syrma SGS is investing in printed circuit board (PCB) manufacturing capabilities. Both companies expect these new facilities to be operational through fiscal year 2027.
Management Perspectives on Market Challenges
Atul Lall, vice-chairman and managing director of Dixon Technologies, highlighted several challenges facing the electronics market during the company's earnings call. "The electronics market faces near-term headwinds from commodity inflation and memory price increase," he stated. "We continue to focus on building scale, bringing operational efficiency, strengthening backward integration, and diversifying the core electronics business to navigate the environment."
Lall specifically pointed to rising memory chip prices as a significant factor affecting the company's performance. "Industry reports indicate this sharp rise, and expect further increases through 2026. For smartphones and PCs, memory chips have emerged as one of the most important line items in the bill of materials, especially for lower-priced devices," he explained.
Syrma SGS, meanwhile, concluded 2025 on a bullish note. Gujral noted that the company had revised its operating margin guidance from 8% to 9% as exports continued to help expand margins. "We're confident of maintaining this tempo as we're seeing secular growth across all verticals, and this diversification is helping us improve our margins and cash flow, which we also expect to do in the coming year as well," he stated.
Analyst Insights on Sector Dynamics
Industry analysts noted that while long-term growth projections for the EMS industry remain intact, short-term concerns could create temporary challenges. Harshit Kapadia, vice-president at brokerage firm Elara Capital, observed: "Aspects such as memory chip price increase and US tariff uncertainties, coupled with a slowdown in the global mobile phone market, will continue to affect companies that have a larger exposure to these areas."
Kapadia further explained: "For companies that have a wider exposure to various industrial electronics, as well as resilient consumer sectors such as laptops where Syrma is showing strength, business resilience will be stronger. But, until then, there could be near-term concerns due to sectoral exposure, especially until the electronics components push for each of these companies materialize."
The contrasting performances of these two EMS companies underscore the growing importance of diversification in the sector. As global economic conditions and specific market segments face varying pressures, companies with broader exposure to multiple industrial segments and export markets appear better positioned to navigate current challenges while maintaining growth momentum.
