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Changing business mix underpins margin expansion

Operating performance in line

* Syrma SGS Technology (SYRMA) reported a strong operating performance in 4QFY25, with EBITDA rising ~46% YoY and margins expanding 510bp YoY, fueled by a favorable business mix (share of low-margin consumer business at 21% in 4QFY25 vs. 46% in 4QFY24). Revenue dipped 19% YoY, mainly due to a 64%/20% YoY decline in consumer/healthcare businesses.

* With the order book continuing to improve to over INR53b as of 4QFY25 (up 19% YoY) and margins expanding, we expect SYRMA to witness a stronger FY26 performance. Management guided 30-35% revenue growth and ~8% EBITDA margin for FY26.

* We broadly maintain our FY26/FY27 EPS estimates and reiterate our BUY rating on the stock with a TP of INR630 (premised on 30x FY27E EPS).

Growth in Automotive and Industrial aids margin expansion

* Consol. revenue declined 19% YoY to INR9.2b (est. INR13.6b) owing to a decline in consumer/healthcare business by 64%/28% YoY. This was offset by a 19%/44%/12% YoY increase in Automotive/industrial /IT & Railway businesses.

* EBITDA margin expanded 510bp YoY to 11.6% (est. 7.7%), which can be attributed to the gross margin expansion of 1,000bp YoY to 27.2%, led by a favorable business mix (lower share of high-volume, low-margin business). EBITDA jumped 46% YoY to INR1b (in line). Adj. PAT surged 87% YoY to INR654m (in line).

* The order book was over INR53b as of Mar’25 vs. INR45b as of Mar’24. The consumer, industrial, automotive, healthcare, and IT & railways segments accounted for ~30%, 28-30%, 25-30%, and the remaining portion of total orders as of Mar’25.

* In FY25, SYRMA’s revenue/EBITDA/Adj. PAT grew 20%/52%/58% YoY to INR38b/INR3b/INR1.7b. CFO for FY25 stood at INR1.7b as against a negative CFO of INR1.1b in FY24. Net WC days declined from 70 days in FY24 to 69 days in FY25. The management expects to sustain WC days around these levels going ahead.

* Gross debt mounted to ~INR6.1b as of Mar’25 from INR5.7b as of Mar’24. Net debt was ~INR2.6b as of Mar’25 vs. INR1.7b as of Mar’24.

Highlights from the management commentary

* Guidance: Management expects an EBITDA margin of ~8% in FY26, translating into INR4b in absolute terms. Strategically, management would like to reduce its exposure to low-margin, high-volume business. Even in the consumer business, the company would continue to grow its high-margin ODM segment.

* Exports remained subdued in FY25 due to tariff-related uncertainties, but the company is confident of crossing the INR10b export mark in FY26. Export growth will also be supported by new clients onboarded in the last 4–5 months, alongside a gradual recovery in EU demand and contributions from the healthcare vertical.

* Healthcare: SYRMA is witnessing traction in sub-segments such as neonatal care, respiratory and heart monitoring devices, and cosmetic lasers. According to the management, these products build long-term growth visibility, since design-led engagements often translate into commercial production 2-3 years later.

Valuation and view

* SYRMA continued its margin recovery, driven by a favorable shift in the business mix in 4Q/FY25. We expect its margins to expand in FY26 as well, led by a decline in the mix of consumer business (lower share in the closing order book).

* We believe that the company’s long-term trajectory will continue to be strong, backed by: 1) its focus on low-volume, high-margin business; 2) an increase in exports; 3) the addition of new customers in the industrial and automotive segments; and 4) increasing traction in the healthcare business going forward.

* We estimate a revenue/EBITDA/adj. PAT CAGR of 32%/34%/46% over FY25-27, driven by strong revenue growth and margin expansion. We reiterate our BUY rating on the stock with a TP of INR630 (premised on 30x FY27E EPS).

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