The brokerage upgraded its rating on Kaynes Technology Ltd. and Syrma SGS Technology Ltd. to “hold” from “sell”, following a sharp price correction in the stocks, with valuations now looking reasonable. Shares of Kaynes Tech have dropped 46% and Syrma SGS Tech have declined 33% so far this year.
While the brokerage is convinced about the growth opportunity in the EMS space, it remains concerned about low barriers to entry, high working capital intensity, and weak cash flow generation for these companies.
Despite upgrading its rating on Kaynes Tech and Syrma SGS, Investec wrote in its note that it prefers stocks like Dixon Technologies Ltd. and Amber Enterprises Ltd. from the EMS space.
Investec said Dixon Tech’s capital efficiency, cost competitiveness and the management’s opportunistic approach stands out.
In the case of Amber Enterprisese, while its consumer durable business faces competitive pressure, its electronics and railways businesses saw healthy Returns on Invested Capital (RoIC) and faces compelling growth drivers, the brokerage said.
Here is a summary of the coverage analysts have on the mentioned stocks:
| Stock | Buy | Hold | Sell |
| Kaynes Tech | 17 | 5 | 1 |
| Syrma SGS Technology Ltd | 20 | 3 | 1 |
| Dixon Tech | 17 | 5 | 9 |
| Amber Enterprises | 21 | 5 | 1 |
Shares of Kaynes Tech have recovered from opening lows to trade 0.8% higher at ₹4,166.6.
Shares of Syrma SGS are trading 3.2% higher at ₹431.9.
Shares of Dixon Tech too have recovered from opening lows and are trading 0.6% higher at ₹14,130, while those of Amber Enterprises are still trading in the red, down 0.2% at ₹5,645.
Also Read: Suzlon Energy share price is below ₹50; the company now has its largest C&I segment order
