Target: ₹364
CMP: ₹297.45
Syrma SGS Technologies is engaged in turnkey electronics manufacturing services, specialising in precision manufacturing for diverse end-use industries, including industrial appliances, automotive, healthcare, consumer products and IT industries. It has developed a niche for itself via its flexi-mixlow- volume approach, diverse industry offerings and focus on high-margin products.
Syrma’s product portfolio includes Printed circuit board assemblies and Radio frequency identification. Syrma also produces other products, which include motherboards, DRAM modules, solid state drives, USB drives and other memory products.
Syrma currently operates through 13 strategically located manufacturing spread across five States. As of FY22 average capacity uilistion was around 75-80 per cent whereas new plants were running at 50 per cent capacity utilisation levels.
Going forward we expect Syrma to clock Revenue/EBITDA/PAT CAGR of 34/44/52 per cent over FY22-24 owing to its strong order book, growing share of ODM revenues (27 per cent of total in FY22) which helps it clock higher margins than its peers, high-mix-low-volume approach, diverse industry offerings and strong export focus (44 per cent of total in FY22).
Accordingly, at 32x FY24 earnings, we believe valuations are attractive as we initiate our coverage on Syrma SGS with a Buy rating and a target price of ₹364.