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ICICI Securities Report
We hosted Syrma SGS Technology Ltd.'s management in Mumbai to meet with institutional investors. We remain enthused about Syrma's growth prospects. Takeaways:
Strong revenue growth run-rate is expected to continue in FY25/FY26 due to demand tailwinds. Syrma is likely to maintain 40%-plus revenue growth YoY in FY25/FY26.
Higher contribution of volume-based consumer business (largely telecom business with lower margins) has led to overall margins declining. However, margins shall stabilise at 7% in FY25 [6.3% in FY24 (6.8% in forex)].
Syrma's production capacity has almost doubled in FY24 (6.1 million components p.a. as of FY24, from 3.2 million in FY23) and is likely to further expand by FY25-end.
Exports are likely to continue its growth momentum in FY25 with revenues scaling past Rs 10 billion.
Syrma is scouting for inorganic acquisition opportunities in the aerospace/defence segments.
We believe Syrma is likely to continue its strong revenue growth momentum over the next two years led by a strong order book and capacity expansion.
While margins have declined due to product mix change, it may revive, following growth in its margin-accretive exports segment, operating leverage and PLI benefits. Maintain Buy.
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