Syrma SGS Q2 Review - High Consumer Business Mix Drives Revenue But Dents Operating Performance: Motilal Oswal

Motilal Oswal Report

Syrma SGS Technology Ltd. reported robust revenue growth of 52% YoY in Q2 FY24, led by strong traction in the consumer (up 2.4 times YoY) and automotive (up 91% YoY) verticals.

However, margins declined (Ebitda margins down 320 bp YoY) due to a high consumer-business mix (built-to-print, low margin business) to 35% (versus 23% in Q2 FY23).

Factoring in Syrma SGS' Q2 FY24 performance, we have increased our revenue growth estimates for FY24/FY25/FY26 on the back of strong consumer order inflows but have reduced the margins.

Accordingly, we have cut our earnings estimate by ~5% each in FY24/FY25/FY26. We retain our 'Buy' rating on the stock with a target price of Rs 700 (38 times FY26E earning per share).

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