Syrma SGS Technology Ltd. share price target

We remain positive on Syrma as (1) there is strong growth in order book (Rs30bn at end of Mar’23 vs Rs21bn at end of Dec’22) which indicates strong revenue visibility in FY24, (2) margins have likely bottomed out in FY23. The company will likely benefit from lower input prices and operating leverage in FY24 and (3) we also model healthcare segment to report revival in H2FY24.

Q4 topline/PAT up 83%/160% YoY spurred by strong growth in the auto and consumer segments

While the revenue growth remained strong, Syrma’s Q3FY23 EBITDA margins were impacted due to (1) lower exports and 76% decline in healthcare revenues, (2) Steep 3x revenue growth in Consumer business which generates low margins and (3) lower revenues from ODM.

Q3 topline growth robust at 70% YoY led by resilient domestic demand; order book expands further to Rs 21bn

With recovery in auto production and electric vehicles, we expect demand for PCBA to increase resulting in higher domestic sales for Syrma. With correction in input prices, we model its margins to improve and inventory days to reduce.

Capacity addition on track to meet expected EMS demand boom, with a total of five SMT lines to be added by end-FY23

Niche EMS-ODM player capable of servicing diverse sectors across the electronics product value chain, yielding best-in-class margins

Syrma reported healthy revenue growth of 118.6% YoY in Q2FY23, led by strong growth in the automotive segment.

Syrma SGS Technology (Syrma) has established strong competitive advantages in EMS industry.

Leading EMS player with best-in-class EBITDA margins of 11-13% vs. 4-8% for listed peers