Shares of Syrma SGS Technology (SSTL) are currently trading 28.6% higher than the issue price of ₹220 apiece.
Recently, domestic brokerage firm HDFC Securities initiated coverage on the stock with a "buy" rating and a target price of ₹294 each, representing an upside of nearly 4% over the next 2-3 quarters from the stock's current market price of ₹283.
The company's shares got listed on the stock exchanges in August 2022 after raising ₹840 crore through its initial public offering (IPO). The IPO received a tremendous response from investors, as it was subscribed by 33.6 times.
Syrma SGS Technology is a technology-focused engineering and design company engaged in turnkey electronics manufacturing services (EMS). It is one of the leading PCBA (printed circuit board assembly) manufacturers in India, supplying to various OEMs and assemblers in the market.
The other range of products offered by Syrma includes custom RFID (radio frequency identification) tags, magnetic disk drives, and coils. Syrma currently operates through 13 strategically located manufacturing facilities in north India and south India.
The company serves marquee customers, including global OEMs, in more than 20 countries, including the USA, Germany, and the UK. It has a robust supplier network with long-standing relationships with global vendors.
In the bull case scenario, HDFC Securities projected the stock price to scale up to ₹319 apiece, valuing the stock at 32x Dec’24E EPS, which indicates a potential upside of close to 12.75%.
"The company has diversified and expanded its product portfolio over the years, providing design and engineering services and ODM services to various industries, such as automotive, healthcare, IT, industrial appliances, and consumer products," said HDFC Securities.
Syrma SGS intends to focus on high-margin and flexible volume businesses in the lighting, medical electronics, aerospace, and defence industry, aligning with its philosophy.
In addition, the company has increased its customer base through new products and segments, strategic acquisitions, and expanded service offerings. Participation in high-value ODM business drives client engagement and repeated business, providing scope for increasing customers' wallet share and commanding better margins, it added.
Further, the brokerage highlighted that the company is in a good position to take advantage of the strong industry tailwinds, such as Make in India, import substitution, PLI, adoption of the China+1 strategy, etc. This is due to its strong research and development capabilities, healthy client relationships, and entry into new segments.
Earlier, another domestic firm, ICICI Securities, also retained its "buy" call on the stock with a target price of ₹325 apiece.
Likewise, BOB Capital Markets also continued its bullish outlook on the stock following the company's December quarter numbers. The brokerage firm stated that the company has exceeded its Q3 FY23 estimates due to strong domestic demand that has more than offset the weakness in exports.
As of December 2022, Syrma had outstanding orders worth ₹21 billion, compared to ₹17 billion in Q2 FY23.
The brokerage believes Syrma has multiple growth levers in the form of a strong order book, timely capacity addition, and traction in the auto, industrial, and consumer verticals.
BOB Capital has revised its earnings per share (EPS) estimates for the fiscal years 2022–23 and 2023–24, increasing the estimate for FY23 by 7% and trimming the estimate for FY24 by 3%. The revision takes into account the Q3 FY23 financial results as well as a change in the product mix.
In light of the revised estimates, the brokerage has increased its target price for the company's shares to ₹400 apiece from ₹390 earlier.
In Q3 FY23, the company reported a robust revenue of ₹512.6 crore, up 70% YoY supported by healthy topline growth in the consumer and automotive segments. The consolidated net profit during the quarter came in at ₹34 crore, an increase of 70% YoY.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.