Syrma SGS Technology growth accelerates as order book and ODM mix strengthen

Investment View and Valuation

ICICI Securities retains its BUY recommendation on Syrma SGS Technology Ltd and raises its estimates following a strong Q1 FY27 performance. The broker’s target price is Rs 1,680, based on a valuation of 52 times P/E, compared with the CMP of Rs 1,378.

The broker sees a strengthening structural growth opportunity in electronic manufacturing services, supported by Syrma SGS’s diversified portfolio, export opportunity, higher-value original design manufacturing (ODM) offerings, upcoming backward integration and healthy balance sheet.

Q1 FY27 Financial Performance

Reported Q1 FY27 revenue was Rs 1,589 crore, increasing 66.7 per cent year on year and 8.4 per cent quarter on quarter. Growth was broad based, with automotive, consumer, IT and railways, and healthcare delivering particularly strong performances.

Industrial revenue declined sequentially because of the back-ended defence schedule and lower smart-meter pickup. EBITDA was Rs 162 crore, up 69 per cent year on year, with a margin of 10.2 per cent. PAT stood at Rs 106 crore, rising 111.8 per cent year on year but declining 11.3 per cent quarter on quarter.

Order Book, Customer Additions and Exports

Management added 18 customers in Q1 FY27, with potential revenue of about Rs 1,000 crore. The order book stood at approximately Rs 6,770 crore as of June 2026, up 23.1 per cent year on year and 2.6 per cent quarter on quarter despite strong execution.

The order book remained diversified across end markets:

• Consumer: about 30 per cent
• Automotive: 29 per cent
• Industrial: 24 per cent
• IT and railways: 9 per cent
• Healthcare: 7 per cent

Exports, which represent a higher-margin business, grew 67 per cent year on year to Rs 381 crore and accounted for about 25 per cent of revenue. Management is targeting export revenue of approximately Rs 1,500-1,600 crore in FY27 and expects to exceed its earlier FY27 revenue-growth guidance of 35 per cent and EBITDA-growth guidance of 30-35 per cent.

Margins and ODM Expansion

Margin performance faced temporary pressure during the quarter. Gross margin was 24.5 per cent in Q1 FY27, compared with 24.7 per cent in Q1 FY26 and 25.9 per cent in Q4 FY26. The decline was attributed to geopolitical supply-chain disruption, higher input costs and a larger consumer mix.

Consumer contributed about 34 per cent of Q1 revenue, up from 26 per cent in Q4 FY26, while the industrial mix declined to 24 per cent from 31 per cent. Employee cost increased to Rs 75 crore. Management aims to limit consumer contribution to 30-32 per cent in FY27 and has maintained its FY27 EBITDA-margin guidance of 10.5-11 per cent.

Management expects supply-chain normalisation, an improving segment mix and a rising ODM contribution to support margin expansion. ODM revenue was Rs 269 crore, representing about 17 per cent of Q1 revenue and increasing 115 per cent year on year. The company aims to raise the ODM mix to 25 per cent over the next few years.

Bare PCB Project and Strategic Expansion

The bare PCB project is progressing as planned. Phase-one capex of about Rs 400 crore has been incurred within the planned total capex of Rs 800-900 crore. Commercial production is expected to begin from April 2027, with first-year utilisation of 40-50 per cent, approximately 1.5 times asset turnover and an EBITDA margin of 15-17 per cent. The project is expected to contribute meaningfully from FY28.

Syrma SGS has also formed a jointly held Indian subsidiary with KAGA, in which Syrma SGS holds 60 per cent, to manufacture KAGA’s EMS requirements.

Balance Sheet and Working Capital

Net cash was approximately Rs 122 crore as of June 2026. Net working capital increased to 71 days from 63 days because of strategic inventory building amid supply disruption.

Key Risks

• Restraint in domestic government support measures.
• Approval-related execution delays.
• A macroeconomic slowdown.