The semiconductor industry is a critical pillar of modern technology, with global sales reaching $580 billion in 2022. Driven by increasing demand for electronics, AI, and IoT, the industry is expected to grow at a compound annual growth rate (CAGR) of 8% through 2028, fueling innovation across various sectors.
With a market capitalization of Rs 7,182.43 crore, the shares of Syrma SGS Technology Ltd were trading at Rs 404.45 per share, decreasing around 2.51 percent as compared to the previous closing price of Rs 415.70 apiece.
Looking forward to the company’s financial performance, revenue magnified by 93 percent from Rs 601 crore in Q4FY23 to Rs 1,160 crore in Q4FY24, during the same period, net profit also plummeted 28 percent from Rs 28 crore to Rs 20 crore.
Motilal Oswal, one of the well-known brokerages in India, gave a ‘Buy’ call on the semi-conductor stock with a target price of Rs 540 apiece, indicating a potential upside of 33 percent from Thursday’s price of Rs 404.50 per share.
Here is the rationale behind the bullish potential upside target:
● SYRMA reported a bad operating performance in 1QFY25, with EBITDA margins decreasing 230bp YoY due to an unfavorable business mix (53% share of low-margin consumer business in 1QFY25 vs. 39% in 1QFY24). However, revenue growth was substantial at 93% YoY, with the consumer category leading the way (increased 2.7x YoY).
● As per the report, consolidated revenue grew 93% YoY to Rs 11.6b (est. Rs10b) owing to strong growth across verticals (Healthcare/consumer/IT & Railways/ automotive/ industrial vertical grew 3.8x/2.7x/2.7x/29%/21% YoY).
● The order book was at Rs 45 billion as of June 24, compared to Rs 45 billion/Rs 35 billion in March 24/June 23. As of June 24, the
consumer/industrial/automotive/healthcare categories accounted for 38-40%, 22-25%, 23-25%, and 6-7% of total orders. The first-quarter order inflow was Rs 12 billion, with the majority coming from the consumer (Rs 4 billion), auto (Rs 4 billion), and industrial sectors (Rs 3.6 billion).
● The management has maintained its sales growth target of 40-45% in FY25, with EBITDA margins of 7% (including PLI and FX gains/losses). The increased mix of industrial and healthcare divisions, as well as stronger exports, may enhance margins for the remainder of FY25.
● SYRMA expects to spend Rs1.35-1.4b on capex in FY25 (Rs 700- 750m already spent in 1Q). The major portion of capex (Rs 1b) will be incurred for the Pune facility, while the rest will be for the Germany facility (prototyping and assembly lines).
Syrma SGS Technology Limited manufactures electronic sub-assemblies, assemblies, box builds, disk drives, memory modules, power supplies/adapters, fiber optic assemblies, magnetic induction coils, RFID products, and other electronic products.
Written by:- Abhishek Singh
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