The China Plus One strategy has emerged as a pivotal approach for multinational corporations (MNCs) looking to diversify their supply chains beyond China.
This strategy aims to mitigate risks associated with over-reliance on a single country for manufacturing and sourcing. As global companies reassess their supply chain strategies, India stands out as a prime candidate to benefit significantly from this shift.
Understanding the China Plus One Strategy
The China+1 strategy involves companies maintaining their existing operations in China while simultaneously establishing production or sourcing capabilities in an additional country.
This diversification is driven by several factors, including rising labour costs in China, geopolitical tensions, and disruptions caused by the COVID-19 pandemic.
India, with its large consumer market, competitive manufacturing costs, and improving infrastructure, is well-positioned to attract foreign investments as companies seek alternatives to China.
Why India is an Attractive Destination?
India can be an attractive destination due to a few major factors including a large and growing consumer market, cost-competitive manufacturing, skilled labour force, improving infrastructure, and strategic geopolitical location.
Moreover, various government initiatives, such as the “Make in India” campaign, aim to attract foreign direct investment (FDI) by offering tax benefits, subsidies, and streamlined regulatory processes. These incentives make it easier for foreign companies to set up and operate in India.
As companies increasingly adopt the China Plus One strategy, certain sectors and stocks in India are poised for growth. Here are a few stocks that could benefit:
Kaynes Technology India Limited
With a market capitalisation of Rs. 30,032 crores, the shares of a global leader in electronic system design and manufacturing solutions surged 1.4 percent on BSE to Rs. 4,835 on Friday.
For FY25, the company expects strong performance across all verticals, aiming to exceed the revenue estimate of Rs. 3,000 crores and achieve an EBITDA margin of 15 percent.
This growth is primarily fueled by organic avenues, existing products, and a broader customer base in sectors such as industrials, automotive, and railways. Additionally, exports are projected to increase from 15 percent to around 20 percent by FY26. As of Q1 FY25, the order book stood at Rs. 5,038.6 crores, up from Rs. 3,000.4 crores in Q1 FY24.
Kaynes Technology India Limited is primarily engaged in the design and manufacturing of advanced electronic modules and solutions catering to a wide range of industries.
Dixon Technologies (India) Limited
With a market capitalisation of Rs. 72,171 crores, the shares of India’s largest electronics manufacturing services provider surged by 0.5 percent to Rs. 12,476.05 on Friday.
Dixon Technologies anticipates that its new focus on the IT hardware sector will generate Rs. 3,500 crores in revenue by FY26, with projections reaching up to Rs. 48,000 crores over the next six years.
The Indian government has been supportive of the electronics manufacturing sector through initiatives like the Production-Linked Incentive (PLI) scheme. Dixon Technologies stands to gain from these incentives, which aim to boost local manufacturing and attract foreign investments.
The company is investing nearly Rs. 250 crores for setting up a new campus in Chennai, which is expected to be operational by Q4 FY25.
The mobile segment remains another key revenue driver, projected to contribute about 70 percent of revenue this year. However, IT products are expected to surpass mobile contributions by next year.
Margins for laptops and notebooks are anticipated to be similar to those of the mobile segment, ranging from 3.5-4 percent. Dixon Technologies is also in discussions with two major global original equipment manufacturers (OEMs) for server production.
Dixon Technologies (India) Limited is primarily involved in the business of manufacturing electronic goods such as consumer durables, home appliances, lighting products, mobile phones, telecom products and security devices.
Aarti Industries Limited
With a market capitalisation of Rs. 21,946.8 crores, the shares of one of the most competitive benzene-based speciality chemical companies in the world surged 0.5 percent on BSE to Rs. 619.95 on Friday.
Aarti aims to capture a significant portion of the Indian market in FY26 and beyond, targeting to replace the imports in the chlorotoluene value chain alone.
In the past quarter, the company established a 50-50 joint venture with UPL, marking a pioneering collaboration in the Indian chemical sector.
This joint venture, Augene Chemical Private Limited, focuses on producing downstream derivatives of amines for use in agrochemicals and paints.
Both companies are expected to invest about Rs. 150 crores each over the next two years, with commercial supplies anticipated to begin by Q1 FY27 and an expected peak annual revenue potential of Rs. 400-500 crores within the next 2-3 years.
Aarti Industries Limited is engaged in the business of manufacturing and dealing in speciality chemicals and intermediates.
Vinati Organics Limited
With a market capitalisation of Rs. 19,955.6 crores, the stock surged nearly 2.8 percent on BSE to Rs. 1,965 on Friday.
As multinational corporations seek alternatives to Chinese suppliers, Vinati Organics is well-placed to capture this demand.
The company’s extensive portfolio of specialty chemicals, including Isobutyl Benzene (IBB) and 2-Acrylamido-2-Methylpropane Sulfonic Acid (ATBS), positions it favourably in a market that is increasingly looking for reliable suppliers outside of China.
The management has noted that the C+1 strategy is becoming a lasting trend, with many companies now considering India as a viable alternative for sourcing chemicals.
Further, Vinati Organics expects revenue growth of 15-20 percent in FY25, supported by a recovery in demand for existing products and the introduction of new offerings.
Established in 1989, Vinati Organics Limited is engaged in the business of manufacturing of speciality chemicals.
Written by Shivani Singh
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