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Systematix Research Report
Syrma SGS Technology Ltd., in a seasonally weak quarter, reported 54%/10%/83% YoY rise in revenue/Ebitda/profit after tax. Lower healthcare revenue (down ~70% YoY and QoQ) dented gross (22.1%, down 602 basis points YoY) and Ebitda (6.1%, down ~240 bps YoY and QoQ) margins.
Reduction in net working capital days (69 versus 86 last year) and operating cash flow/Ebitda (45%) are inline with Syrma's focus areas.
Growth momentum has sustained in July (up 47% YoY); management hopes margins to revive in coming quarters and reach ~10% in FY24 on superior mix (verticals, exports, original design manufacturing) and operating leverage. A more than Rs 4 billion capex over next two years across plant locations will double capacity.
Forayed into MedTech vertical should also aid growth and margins. We retain our estimates and expect 32%/38%/44% compound annual growth rate in revenue/ Ebitda/profit after tax over FY23-25E (FY20-23: 33%/11%/11%), driven by strong order booking in all the verticals, with Ebitda margin expanding 80 bps to 10% and healthy 20% return in invested capital in FY25E despite high capex.
We remain constructive on robust prospects of Syrma. Its scrip has almost doubled in last three months and is currently trading at 35 times FY25E price/earning on current market price.
We maintain our 'Buy' rating, with an unchanged target price of Rs 560 (40 times FY25E EPS of Rs 14).
While order book position (~1.5 times FY23 revenue) is strong, its on-time execution is the key monitorable.
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