SYRMA - Syrma SGS Technology Limited Share Price

The management of Syrma SGS Technology Limited, led by Managing Director Mr. J.S. Gujral, provided a positive outlook during the earnings call for Q4 FY '25. The company achieved a full-year revenue of INR 3,836 crores, growing 19% year-on-year, with an operating EBITDA margin of 8.6%. Looking ahead, management expects to grow revenue by 30%-35% in FY '26, retaining the Consumer business at around 30% of total revenues while focusing on higher-margin sectors such as Automotive, Industrial, and Health care.

Key points from the outlook include:

1. Long-Term Strategy: Management aims to reduce the Consumer sector's contribution from 35% to 30%, focusing instead on high-margin verticals. This recalibration in strategy is expected to enhance overall profitability.

2. Revenue Growth: Management guides for a revenue of approximately INR 1,000 crores from exports, which are anticipated to see growth following a subdued FY '25 where the figure reached around INR 800 crores due to tariff uncertainties.

3. New Customers: The addition of 20 to 25 new customers is expected to drive revenue in FY '26 and FY '27, primarily within the Automotive and Industrial segments.

4. Operational Efficiency: The company has seen significant EBITDA margin expansion from 7% to 8.6% and plans to maintain margins around 8% in the upcoming fiscal year, reflecting continued focus on operational efficiencies.

5. Order Book: As of March 31, 2025, Syrma's order book stands at INR 5,200 to 5,400 crores, indicating healthy future revenue potential over a timeline extending to 18 months.

6. ESG Performance: Syrma has received a score of 70% from EcoVadis, ranking it among the top 35 companies globally in meeting ESG standards.

These projections and performance metrics paint a robust growth trajectory for Syrma SGS Technology, driven by strategic focus on high-margin businesses and improvements in operational efficiencies.

Question 1: What is troubling our Consumer business? Which product segment? And how is the current run rate in terms of exit?

Answer: There's nothing troubling in the Consumer business per se; it's about strategic focus. We are recalibrating towards higher-margin segments like Industrial and Health care. Our Consumer business constituted 35% of revenues this fiscal and we're looking to bring it down to about 30%. We did around INR190 crores in Q4, and the year-end average is important as quarterly figures can fluctuate. We're consciously shifting our focus toward profitability, which may affect top-line growth temporarily.

Question 2: What would drive the EBITDA margin decline from 8.6% to 8% for FY '26?

Answer: We're guiding 8% EBITDA margin, which reflects a strategic approach to high-margin sectors, with a conservative mindset. Our last year's delivery was slightly above guidance, and we expect a natural scaling back as we shift focus. While Consumer's contribution declines, we anticipate margin gains from higher-margin verticals like IT and Automotive, balancing our overall profitability.

Question 3: What is driving the increase in debtor and payable days?

Answer: The working capital has risen primarily due to commercial strategies where we extend credit periods with customers alongside negotiating favorable terms with suppliers. Our inventory levels dropped substantially by 18%, indicating control. The net working capital remains strong at around 69 days, reflecting our efficient management amidst fluctuating debtor and creditor days.

Question 4: Can you provide the order book numbers?

Answer: The order book stands between INR5,200 crores to INR5,400 crores as of March 31, 2025. This includes exposure across Automotive (25-27%), Consumer (30%), Industrial (28-30%), and other verticals like IT and Health care, contributing approximately 15%. Our revenue guidance aligns with these figures as we anticipate continued growth.

Question 5: Will the strategy shift toward Consumer business be permanent?

Answer: Yes, we'll maintain this strategy to focus on high-margin businesses moving forward. While we are reducing the overall Consumer business, there will still be segments within it that align with our design and manufacturing core competencies. Our plan is structured to maintain reasonable revenue while prioritizing margin accretion across industries.

Question 6: Any updates on the QIP plan and PCB business?

Answer: The QIP has been revalidated to ensure financial flexibility for potential acquisitions and component manufacturing under the government scheme. We're evaluating various components, including PCBs, but nothing is finalized yet. We aim to participate actively in this scheme with a credible technology partner to enhance our manufacturing capabilities.

Question 7: How do you foresee the export growth impacted by the tariff situation?

Answer: Despite tariffs being in flux, we anticipate crossing INR1,000 crores in exports in FY '26. This projection is driven by orders and customer feedback, alongside signs of a rebound in Europe. The potential impact of tariffs is acknowledged, yet we believe India will remain competitively positioned, maintaining advantageous margins unlike other competing nations.

Question 8: What incentives might we expect from the PLI scheme in FY '26?

Answer: We foresee PLI incentives potentially ranging from INR15 crores to INR18 crores based on the consumer business volume, reflecting the reduced Consumer segment. The estimate could vary depending on our performance and the number of eligible businesses; this extends across planned operations in the coming fiscal year.

Question 9: Can we discuss how the contributions from our segments will change in FY '26?

Answer: For FY '26, we expect Consumer to account for about 30%, with Industrial and Automotive increasing their shares significantly. We project that Industrial will contribute about 30% and Automotive around 25%, with Healthcare and IT together filling the remaining share. The goal is to manage the transition towards higher-margin products while preserving revenue growth.

Question 10: How much PLI incentive was accounted for in FY '25?

Answer: For FY '25, we booked approximately INR36-38 crores in PLI incentives and around INR8 crores specifically in Q4. Future estimates will depend on the balance of business activities and contributions from segments benefitting from these incentives.