Syrma SGS Technology Ltd. has received a bullish initiation from HSBC, which sees the electronics manufacturing services company benefiting from India's fast-growing EMS market, backward integration and inorganic expansion.
The brokerage initiated coverage with a ‘Buy' rating and a target price of Rs 1,750, implying an upside of about 27% from the July 8 closing price of Rs 1,370, making the target the highest on the Street, as per Bloomberg data.
The stock currently has 21 buy calls, five hold calls, and only one sell call, with the average target price pinned at Rs 1,310.86, implying a 4.1% downside potential.
High-Growth Manufacturing At Scale
HSBC described Syrma SGS as one of India's leading EMS companies, with a diversified customer base and expertise in original design manufacturing. The company has evolved from assembling printed circuit boards for sectors such as IT and consumer electronics to manufacturing the boards themselves—an area where India currently imports about 90% of its demand.
HSBC expects Syrma's sales, EBITDA and net profit to grow at compound annual rates of 32%, 33% and 35%, respectively, between FY26 and FY29.
The brokerage said growth is supported by strong demand across sectors, particularly automobiles and industrials, while the company's high export mix, engineering capabilities, product mix and vertical integration could support margins over the longer term.
Why HSBC Sees More Growth Ahead
India's EMS industry is projected to grow at a 27% CAGR between 2024 and 2029 and capture about 32% of the $320-billion incremental global opportunity during the period, according to the brokerage. HSBC believes Syrma is well placed to benefit as it expands its customer base and vertically integrates. The company has also used inorganic acquisitions and joint ventures to supplement growth.
Government support is another tailwind. The brokerage highlighted manufacturing incentives and the proposed $13-billion allocation for India Semiconductor Mission 2.0, which could have a trickle-down benefit for EMS companies.
Why The High Valuation?
HSBC's Rs 1,750 target implies a two-year forward price-to-earnings multiple of 53 times and a Price/Earnings-to-Growth (PEG) ratio of 1.5 times. The brokerage said such a premium is justified by the company's growth profile. It expects earnings per share to compound at about 34% over the next three years.
However, HSBC flagged competition in low-margin assembly as a key concern. Other risks include geopolitical factors affecting exports and delays in commissioning new plants, which could constrain capacity.
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