Synopsis:
Syrma SGS is in focus as global giant JP Morgan sees a 28% upside in this stock, citing strong utilisation of QIP and the third-fastest-growing company, at a 30% revenue CAGR over FY25-28.
The shares of this leading electronics manufacturing services (EMS) provider are in focus because of a strong rationale delivered by JP Morgan. In this article, we will dive more into the details.
With a market capitalization of Rs 14,286 crore, the shares of Syrma SGS Technology Ltd are currently trading at Rs 744 per share, representing a decline of just 5 percent from its 52-week high of Rs 781.05 per share. In the last one year, the stock has delivered an impressive return of 69 percent.
Analyst Comments
Global giant, JP Morgan, has maintained an overweight rating on the stock and has assigned a Buy call on the stock with a target price of Rs 950 per share, raising the target price from earlier Rs 800, which now signifies an upside potential of 28 percent from its previous day closing price of Rs 744 per share.
JP Morgan has cited that Syrma is gearing up to raise funds through a Qualified Institutional Placement (QIP), with the expectation that the proceeds will be directed towards mergers and acquisitions (M&A).
However, the brokerage thinks that the mobile segment probably won’t be a key area for acquisitions due to its relatively low margins. It’s worth noting that Syrma’s last significant acquisition was beneficial for margins, positively impacting profitability, and a similar approach is anticipated moving forward.
With a solid growth outlook and smart capital deployment, JP Morgan forecasts that Syrma will be the third-fastest-growing company in its sector, projecting a 30 percent revenue CAGR from FY25 to FY28.
Financial Highlights
Syrma SGS’s revenue for Q1 FY26 came in at Rs 944 crore, registering a 19 percent decline from Rs 1,160 crore in the same quarter last year. However, on a sequential basis, revenue grew by 2 percent from Rs 924 crore in Q4 FY25.
Coming to its profitability, the company reported a net profit growth of 150 percent to Rs 50 crore in Q1 FY26 as compared to Rs 20 crore in Q1 FY25. However, on a QoQ basis, it declined by 30 percent from Rs 71 crore.
The stock delivered an ROE and ROCE of 10.19 percent and 12.41 percent respectively, and is currently trading at a high P/E of 71x as compared to its industry average of 37.17x.
Syrma SGS Technology Limited stands out as a top-notch provider of comprehensive electronic manufacturing services (EMS), with a strong presence in India, the US, Germany, and various other global markets. They deliver a full range of solutions, from product design and development to prototyping, system integration, and original design manufacturing.
The company earlier announced establishing Syrma Semicon Private Limited (SSPL) in November 2023, which specializes in designing, manufacturing, and distributing semiconductor-related products like memory chips and PCB assemblies. The company is also exploring opportunities in the OSAT market, assessing technology, joint ventures, and supply chain feasibility.
Their impressive lineup features printed circuit board assemblies (PCBAs), box builds, electromechanical assemblies, RFID products, custom magnetic components, and testing solutions.
Syrma caters to a wide array of industries, including automotive, consumer electronics, industrial, healthcare, railways, and IT, solidifying its role as a significant player in the worldwide EMS landscape.
Written by Satyajeet Mukherjee
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