CLSA has flagged rising risks for India’s electronics manufacturing services (EMS) sector amid a sharp uptick in memory prices, and has downgraded Dixon Technologies, citing it as one of the most likely to be affected.
The brokerage downgraded the stock to ‘Hold’ from ‘Outperform’, cutting its target price to ₹12,100 from ₹15,880 per share.
Combined with years of under-investment and accelerating demand, this has pushed inventories to historical lows and led to sharp price increases, CLSA said. In January, DDR5 and DDR4 contract prices rose 119 per cent and 63 per cent month-on-month, respectively, while NAND contract prices climbed 37-67 per cent, alongside strong gains in spot markets, the report said.
India more exposed to supply squeeze
EMS players most at risk
The brokerage said the consumer electronics segment, especially smartphones, would be the most affected. Memory accounts for 20-25 per cent of smartphone costs, which could result in 10-25 per cent increases in average selling prices, disproportionately impacting low- and mid-end models.
CLSA believes Dixon Technologies could be among the most impacted companies. While the company follows a cost pass-through model, insulating margins from higher memory prices, weaker end-demand could hurt volumes.
The brokerage also flagged potential delays in the Vivo joint venture and approvals under the Electronics Components Manufacturing Scheme, along with the expiry of performance-linked incentives in March, as near-term risks.
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