During Tuesday’s trading session, the shares of one of the leading electronics systems design and manufacturing companies in India moved up by 17.8 percent to hit an intraday high at Rs. 508.85 on BSE.
Stock Performance:
With a market cap of Rs. 8,890 crores, the shares of Syrma SGS Technology Limited opened in red at Rs. 502.7 on BSE, down by nearly 0.5 percent, as compared to its previous closing price of Rs. 505.2.
The stock hit its 52-week high at Rs. 705 on 19th December 2023, and compared to Tuesday’s closing price of Rs. 497.6, the stock is trading at a discount of nearly 30 percent.
Though the stock has given negative returns of around 18.2 percent in the last one year, as well as nearly 24.6 percent returns year-to-date, it has delivered more than 25 percent of positive returns in the last five trading sessions.
Although the stock has delivered negative returns of around 18.2 percent over the last one year, as well as about 24.6 percent year-to-date, it has given over 25 percent of positive returns during the last five trading sessions.
Brokerage Target:
The domestic brokerage firm Motilal Oswal initiated a ‘buy’ rating on Syrma SGS Technology Limited and assigned a target price of Rs. 550 per share, representing a potential upside of nearly 10 per cent from Thursday’s opening price of Rs. 505.
Following the target initiated by the brokerage, the stock jumped by over 17 percent on BSE reaching an intraday high at Rs. 508.85 on Tuesday.
Motilal Oswal projects a compound annual growth rate (CAGR) of 35 percent in revenue, 44 percent in EBITDA, and 53 percent in adjusted PAT from FY24 to FY27, fueled by robust revenue growth and margin enhancement.
The brokerage maintains a ‘buy’ recommendation on the stock, setting a target price of Rs. 550 per share, which is based on a 30x multiple of the estimated EPS for September 2026.
Financials:
The company reported a growth in revenue from operations, experiencing a year-on-year rise of nearly 17 percent, from Rs. 712 crores in Q2 FY24 to Rs. 833 crores in Q2 FY25.
Similarly, net profit increased from Rs. 30.5 crores to Rs. 39.6 crores during the same period, reflecting a growth of 30 percent YoY.
In addition, the company has maintained better net profit margins reporting 4.7 percent in Q2 FY25, as against 4.2 percent in Q2 FY24.
On a year-on-year basis, the consolidated EBITDA increased from Rs. 59 crores in Q2 FY24 to Rs. 81 crores in Q2 FY25, registering a growth of 37.4 percent YoY, while the company’s EBITDA margins grew to 9.6 percent from 8.2 percent, over the same period.
Key Financial Ratios:
In terms of key financial metrics, Syrma SGS Technology currently has a Return on Equity (RoE) of 6.81 percent and a return on capital employed (RoCE) of 9.84 percent. Further, the company’s debt-to-equity ratio stands at 0.4 in Q2 FY25, as against 0.2 in Q2 FY24.
Order Book & Capex Plans:
In Q1 FY25, the company’s open order book position stood at nearly Rs. 4,500 crores. This includes almost 23-25 percent from the auto segment, around 38-40 percent from the consumer segment, 22-25 percent from the industrial segment, about 6-7 percent from healthcare, with the remaining portion from IT and railways businesses.
Additionally, the order intake for the period reached Rs. 1,200 crores, with notable growth primarily observed in the auto and industrial segments, alongside the consumer segment.
For FY25, the company plans to allocate ~Rs. 100 crores for a new under-commissioning facility in Pune, which is anticipated to commence trial production in Q3 FY25.
Similarly, the company has set aside around Rs. 35-40 crores for a new facility in Stuttgart, Germany, which will serve as a prototype income assembling center in Europe.
Management Guidance:
In FY25, Syrma SGS Technology expects the smart metering business to contribute over Rs. 200 crores to its revenue. The company has also secured a significant contract for the design of medical devices from a global firm, which is expected to enhance the MedTech devices business in the coming years.
The company is confident in maintaining a growth trajectory of 40-45 percent in revenue and operating EBITDA, projecting a total of around Rs. 310-325 crores for the full year.
The company continues to prioritize the reduction of working capital, aiming to improve free cash flows for the full year while decreasing its net debt position.
In Q1 FY25, the automotive segment accounted for only 16 percent of revenue. The company is targeting an increase to approximately 20-25 percent contribution from the automotive segment to its overall business.
The healthcare business, which includes RFID, EMS, and MedTech devices, is expected to reach around Rs. 350-360 crores in FY25.
In 2023, exports grew by around 26 percent, reaching about $100 million, or ~Rs. 800 crores. The expectation for this year is for exports to exceed Rs. 1,000 crores, indicating an anticipated annual growth of 20-25 percent.
About the Company:
Syrma SGS Technology Limited is engaged in the business of manufacturing various electronic sub-assemblies, assemblies and box builds, disk drives, memory modules, power supplies/adapters, fibre optic assemblies, magnetic induction coils and RFID products and other electronic products.
Written by Shivani Singh
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