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Shares of Syrma SGS Technology tanked 17.7 per cent to Rs 387.75 apiece on the BSE in Monday's intraday trade as profit margins contracted in the March quarter of FY24 (Q4FY24).
Syrma SGS' gross profit margin and Ebitda margin contracted 430bps and 222bps, respectively, year-on-year (Y-o-Y) due to higher commodity costs, and change in revenue mix. This also impacted the company's profitability.
Syrma SGS' adjusted net profit declined 17.5 per cent Y-o-Y to Rs 452.14 crore.
Operationally, however, revenue from operations clocked a notable increase of 67 per cent Y-o-Y to Rs 1,134.09 crore in Q4FY24. Ebitda, too, grew 24.4 per cent Y-o-Y.
"While Ebitda margin improved 101bps sequentially, it declined 222bps Y-o-Y. We reckon margin has declined due to focus on high volume-based automotive and consumer business with relatively lesser margins, and higher input prices. We believe revival in the healthcare segment and operating leverage benefits may revive margins in FY25/26," said analysts at ICICI Securities.
In Q4FY24, auto, consumer, healthcare, industrials, and IT & railways segments reported Y-o-Y revenue growth of 46.7 per cent, 92.8 per cent, 147.6 per cent, 39.2 per cent, and 5.2 per cent, respectively, Y-o-Y.
The cumulative contribution of volume-based segments like automotive and consumer has increased to 61 per cent of overall revenue in FY24 from 40 per cent in FY22. At the same time, revenue contribution of margin-accretive segments like healthcare and industrial has declined. Analysts reckon this shift in revenue mix to continue, considering the higher demand from automotive and consumer segments.
ICICI Securities, however, has cut their earnings estimates to factor in lower profitability from Q4FY24.
"We model Syrma SGS to report revenue and PAT CAGR of 40.8 per cent and 59.4 per cent, respectively, over FY24-26, while RoE may move up to 13.8 per cent in FY26, from 6.7 per cent in FY24. We revise our target price to Rs 600 (earlier: Rs 675), implied P/E works out to 38x FY26E EPS," the brokerage said.
At 3:10 PM, Syrma SGS was down 16.3 per cent at Rs 395 apiece as against a 0.09-per cent rise in the benchmark S&P BSE Sensex. The stock hit a 52-week low of Rs 301 on <ay 12, 2023.
Syrma SGS Technology is a Chennai-based engineering and design company engaged in electronics manufacturing services (EMS). It provides high-mix, flexible volume, precision OEM manufacturing. Its offerings include product design, quick prototyping, PCB assembly, Box build, repair & rework and automatic tester development services.
Syrma SGS also offers OEM solutions for RFID tags and inlays and high-frequency magnetic components.
