Buy Syrma SGS Technology Ltd for the Target Rs 2,050 by Emkay Global Financial Services Ltd
Syrma SGS’s annual report highlights a cogent strategy of growth and capability building through 3 key vectors: core revenue and profitability growth, entry into and growth of new qualification-intensive verticals through partnerships, and component manufacturing through PCB-M foray. The company’s diversified presence across industries served (5 industries, 6 product platforms), customers (350+ active customer relationships, Top 5 customers at ~34% revenues), geographies served (35+), and assets (17 manufacturing facilities, 4 R&D centers, 1 US sales office) showcases its scale and preparedness for growth.
We fine-tune our estimates:
1) lower Johari and Elcome’s gross margins in FY27/FY28-FY33E to 47.5%/50% from 55%, taking into account FY26 performance and context
2) increase Elemaster’s revenue in line with management guidance to Rs0.7/Rs4.6bn for FY27E/FY32E
3) rebalance the growth profile of the Medtech business between Johari Medtech and Syrma’s legacy medical electronics business, given the strong performance of the former and subdued growth in the latter. We build in FY26-FY31E revenue/EBITDA/PAT CAGR of 34%/39%/40% and reiterate BUY with Sep27E TP of Rs2,050, implying 65x FY28E PER.
Core revenue/profitability growth supported by diversified addressable market
Syrma SGS’s core EMS business is well diversified. The company serves sectors such as automotive, consumer, industrials (including clean energy), railways, medtech, IT/telecom, and defense. The company reported 350+ active customer relationships, adding 18 new customers in 1QFY27 and 32 in FY26, with incremental revenue potential of Rs10bn in FY27 and Rs25bnpa over 3-5years. The Top 5/Top 20 customers contribute 34%/63% of total operating revenue. The FY26 AR provides more detailed insights into the company’s products than previous editions, with multiple products across verticals requiring high process expertise and growth vectors ranging from new customers, volume growth, value growth, and exports
Capability expansion through partnerships in PCB-M/qualification-led verticals
Syrma SGS highlighted its entry into qualification-intensive verticals such as defense and advanced industrials/railways through the Elcome acquisition and Elemaster JV, respectively. Further, the company is already executing its PCB-M foray through the Shinhyup JV. Elcome’s defense business is expected to deliver +20% CAGR over the next 3 years from a relatively small base of Rs2.8bn in FY26, with 20-25% EBITDAM. The Elemaster JV is expected to grow from Rs0.6bn in FY26 to Rs4.6bn by FY32E. PCB-M is currently in the build-out phase, with Rs4.5-5bn of capex expected this year and pilot production scheduled to start from 4QFY27
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