Syrma hits new high on 1-yr lock-in expiry; more than doubles since listing

The share price of Syrma SGS Technology (Syrma) jumped 8.3 per cent to scale a fresh high of Rs 535 on the BSE in Friday's trade on account of the expiry of its pre-listing 1-year lock-in period.  

The company's lock-in period expiry today has enabled more liquidity in the scrip. A total of 4.22 crore shares (42.2 million) of the company were locked in during the last one year, making up for 24 per cent of its total outstanding shares, as per a report by Nuvama Institutional Equities. 

The stock, which listed a year ago on August 26, 2022, has surged nearly 2.5 times (143 per cent) from its issue price of Rs 220. On its debut day, the stock had closed with a 41 per cent gain. 
 

In a recent report, analysts at Nuvama initated coverage on Syrma with a 'buy' rating and a target price of Rs 760, valuing it at 35 times 1-year forward PE. 

Syrma SGS is an established domestic player in the non-mobile electronic manufacuring service (EMS) space, and its large diversified business model should keep it electrified, enabling it to ride the EMS megatrend, they said in the note. 

India’s policy push via PLI and Make in India and cost economics could propel domestic electronics output to $300 bn from $100 bn over the next five years, it said, calling this an unmistakable megatrend—which is creating a super cycle for the Indian EMS space.  

The report said Syrma has built scale, operational excellence, reliability and complexity over time in PCBA, box-builds and ODM. Its model, which is more open to mid volume-mid value, is more suited to capturing growth in the EMS super cycle. 

It added that Syrma's business model is well-diversified with revenue spread across verticals such as autos, consumer, healthcare, industrials, IT and railways, which are rapidly growing. This diversification offers a hedge—should there be a downturn in specific sectors. 

"EMS stocks’ current PEs are 30– 40x but they are at in very early stages of a long, high-growth cycle. Hence, even if one assumes that valuations have discounted the story, earnings compounding over the next five–seven years still have potential to deliver extremely healthy stock returns", the note adds.

Besides Syrma, the brokerage has also initiated coverage on Kaynes Tech with a buy rating and a target price of Rs 2,340.