Four reasons why DAM Capital expects this 'doubler' EMS stock to rally another 22%

Brokerage firm DAM Capital initiated coverage on Centum Electronics on Wednesday, September 23, with a "Buy" rating, setting a target price of ₹6,000 per share.

DAM Capital's price target implies an upside potential of 22% from the stock's closing levels on Tuesday.

The coverage was initiated by DAM Capital citing the company's strong positioning in core electronics manufacturing and its expanding footprint in high-growth sectors such as defence and semiconductors.

The firm said it liked Centum Electronics for its focus on build-to-spec and electronics manufacturing services (BTS / EMS), which it described as the company's core area of competency.

The brokerage noted that Centum had divested its overseas business, taking a write-off of ₹203 crore in the process, as part of efforts to sharpen this focus on the domestic market. DAM Capital added that the company benefited from high barriers to entry for its products, with around 70% of its business coming from contracts where it was the sole supplier.

DAM Capital's optimism stemmed from Centum's push into newer growth avenues, particularly defence and semiconductors, which the brokerage expected these to drive strong growth for the company in the coming years.

The company has guided for projected revenue growth of 25%-30% annually over the next few years, supported by improving margins. DAM Capital expects the company's earnings before interest, tax, depreciation and amortisation (EBITDA) to grow at a compounded annual growth rate (CAGR) of 37% between FY26 and FY29.

On profitability, the brokerage estimated Centum's earnings would grow at a compound annual rate of 38%, while return on capital employed (ROCE) was expected to stay above 20% through FY27-29.

At the current price, Centum Electronics shares are trading at 50 times and 35 times their financial year 2028 and 2029 estimated earnings. This comes with a strong runway for growth, potential to grow earnings at a 38% CAGR and with more than 20% Return on Capital Employed (RoCE) over financial year 2027-2029, the brokerage said.

Centum is covered only by three analysts and all three have a "buy" rating on the stock.

Shares of Centum Electronics ended 3.2% higher on Tuesday, at ₹4,892, having hit a 52-week high as well. The stock has already risen 114% so far this year.

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