Explained: Why Jefferies prefers Kaynes Tech shares over Dixon Tech; urges caution on Syrma SGS

International brokerage firm Jefferies has favoured electronics component maker Kaynes Technology over mobile assembly giant Dixon Technologies as India steps up efforts to deepen domestic manufacturing of electronics components, while advising investors to exercise caution on Syrma SGS Technology following its sharp rally this year.

The brokerage has a Buy call on Kaynes Tech with a target price of Rs 4,480, while a Hold rating on Dixon and a target of Rs 12,730. Analysts have also assigned a Hold call on Syrma with a target of Rs 1,430 per share.

The brokerage said India's electronics production has doubled over five years, rising to Rs 12.1 trillion in FY26 from FY21. However, mobile production accounted for around 48% of this in FY26, while domestic value addition has remained limited at an estimated less than 15%.


The government is now seeking to address this gap by incentivising component manufacturing through the Electronics Component Manufacturing Scheme (ECMS) and the recently rolled out Mobile 2.0 Production Linked Incentive scheme (MPMS).

Jefferies expects ECMS to cover around 50% of the mobile bill of materials by the end of its six-year tenure. Printed circuit board (PCB) manufacturing, including HDI and multi-layer boards, is among the key component opportunities.

The brokerage estimates the PCB market has a total addressable market of around $7 billion, with 85-90% of requirements currently met through imports. Imports of PCBs of up to six layers also attract around 30% additional duty.

Foreign partnerships could help Indian manufacturers bridge technology gaps in components, Jefferies said, citing examples such as Dixon-HKC, QTech and Syrma-Shinhyup.

The ECMS has so far approved 106 projects, compared with 249 initial applications. On August 17, the government approved the fifth tranche of the scheme, covering 31 projects across components such as filters, coils and speakers, as well as raw materials including acetylene black and electrolyte additives.

Of the 106 approved projects, 25 are in electromechanicals, 23 in PCBs, 15 in supply chain, 11 in capital equipment, seven in passive components, six each in camera modules, enclosures and optical transceivers, five in display modules and two in lithium-ion cells. Jefferies said 38 plants have already started production, while another 16 projects are at advanced stages of construction or machinery installation.

The approved projects represent total investments of around Rs 695 billion across 14 states, including Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Maharashtra, Tamil Nadu, Telangana, Uttar Pradesh and Uttarakhand.

While ECMS is focused on building a domestic component ecosystem, MPMS is aimed at increasing mobile production, exports and value addition. Notified in July 2026, MPMS targets mobile production of Rs 39 trillion over its tenure, compared with around Rs 25 trillion under the first LSEM scheme.

The second mobile PLI scheme has an outlay of Rs 625 billion and will run for five years from FY27 to FY31E. Incentive rates are differentiated based on sales and range between 2.25% and 5%. The scheme also provides an additional 1.5% incentive for domestic sourcing of key components, covering display modules, cameras, enclosures, batteries and USB cables.

To qualify for these additional sourcing incentives, the components must be localised for a minimum of 25% of mobile phones produced during the financial year.

MPMS will target two segments, mobile manufacturers and Indian mobile brands. For mobile manufacturers, eligibility requires minimum FY26 sales of Rs 100 billion and incremental annual sales of at least Rs 50 billion above the FY26 level. Indian brands must be registered in India, own intellectual property locally, have in-house R&D, be controlled by Indian management and have more than 51% ownership by an Indian citizen. Indian brands will also have a one-year gestation period option, with a 5% incentive and an additional 3% incentive for domestic design and R&D.

Jefferies sees the two schemes serving different purposes, with ECMS aimed at increasing backward integration in components and MPMS focused on strengthening exports and value addition in mobile manufacturing. While ECMS has an outlay of Rs 400 billion over six years, MPMS carries an outlay of Rs 625 billion over five years.

Dixon was a key beneficiary of the first LSEM scheme, but Jefferies expects competition to be higher under MPMS. The brokerage therefore prefers component plays, with Kaynes Technology rated Buy at 55x one-year forward earnings, over assembly OEMs, with Dixon rated Hold at 67x. It has also recommended prudence on Syrma SGS, which is rated Hold at 57x following a 105% rally year-to-date.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)