Fundamental analysis of Syrma SGS technology
Fundamental analysis of Syrma SGS technology: Imagine a world where circuits hum with life and innovation breathes life into every electronic device we touch. This is the domain of Electronics Manufacturing Services (EMS), which conducts the orchestra behind the scenes of the Tech Symphony.
In our exploration today, we are peeling back the layers of this thrilling world, with a special focus on the unique role played by Syrma SGS technology. In this article, we perform a fundamental analysis of Syrma SGS Technology Ltd and analyze the company’s potential prospects.
Fundamental analysis of Syrma SGS technology
Let’s start our basic analysis of Syrma SGS technology by learning about the company’s operations and products. Next, let’s look at equity finances. The article concludes with highlights and a summary of future plans.
Industry Overview
India will become a global leader in electronics manufacturing and play a critical role in the country’s goal of becoming a $10 trillion economy. India’s EMS industry is expected to reach a market size of $80 billion in the next five years, with a significant portion of this growth likely to be driven by mobile, consumer electronics, and consumer electronics.
Other sectors such as lighting and automotive are also expected to contribute to this growth. India is expected to emerge as a major player in the electronics manufacturing industry over the next decade, driven by growing domestic demand and strengthening export competitiveness.
Domestic production nearly doubled between FY17 and FY22, and this trend is expected to continue at a CAGR of 24% between FY22 and FY27.
Company Overview
Syrma SGS is a design-led manufacturing company with deep expertise in mobility, high-tech, healthcare, consumer, industrial and other solutions. Located in Chennai, the company is a turnkey Electronic Manufacturing Services (EMS) manufacturer.
The company’s comprehensive EMS product line includes everything from product design to rapid prototyping, PCB assembly, and box fabrication. We also provide customized end-to-end solutions for RFID tags and inlays, high-frequency magnetic components, repair, rework, and automated tester development services.
The company has been in the EMS field for over 40 years and currently serves more than 270 customers across 20 countries. Syrma has 12 manufacturing facilities and 3 research and development laboratories with a total plant area of 8.25 Lakh sq ft.
Syrma’s key customers are the consumer, industrial, healthcare, automotive and IT sectors. The company earns 70% of its revenue from the domestic segment, with exports accounting for 30%.
The following image shows a breakdown of company profits across different industries.
Fundamental Analysis of Syrma SGS Technology – Finance
Let us now perform a fundamental analysis of Syrma SGS Technology Limited using the annual reports published by the company.
Increased sales and net profit
The company’s income statement shows that the company’s revenue has increased from Rs.879 Crores to Rs.879 Crores. 2,092 each from FY20 to FY23. This gives the company a three-year CAGR of 33.51% in revenue.
During the same period, the company’s net profit increased from Rs.91 Crores to 123 Crores, but at a CAGR of 10.57%.
The table below shows Syrma SGS Technology Ltd’s total revenue and net profit for four financial years.
Margin analysis
Although the company’s revenue and profits have increased over the years, the company’s margins show a different picture. The company’s operating profit margin and net profit margin are showing a downward trend until FY22 and are showing a slight upward trend in FY23.
This means that along with the increase in sales, the company’s operating expenses also increased. During FY23, the company reported operating margin and net profit margin of 11.1% and 5.88%, respectively.
The table below shows the operating and net profit margins of Syrma SGS Technology Ltd for four financial years.
Rate of Return: RoE and RoCE
The company’s rate of return also follows a similar trend as the company’s operating profit margin. ROE and ROCE decreased until FY22 and then increased slightly in FY23.
During FY23, the company reported ROE and ROCE of 11.66% and 14.99%, respectively. This means that the efficiency with which the company utilizes its resources and the return on capital invested by shareholders are below average.
The table below shows Syrma SGS Technology Ltd’s ROE and ROCE over four fiscal years.
Debt and interest coverage ratio
If we look at the company’s leverage situation, we can see that the company has maintained a consistent and debt-to-equity ratio over the past four fiscal years.
During FY23, the company reported a debt to equity ratio of 0.28. This means that the company is using its funds primarily for business operations and may borrow additional funds to grow its business.
During FY23, the company reported an interest coverage ratio of 7.95. This means the company has earned enough profits to pay an additional six times the interest.
The table below shows Syrma SGS Technology Ltd’s debt to equity and interest coverage ratios for four fiscal years.
Future plans for Syrma SGS technology
So far, we have looked at data from previous fiscal years for a fundamental analysis of Syrma SGS Technology. In this section, we will try to understand what the future holds for the company and its investors.
- Currently, the company has orders worth 50 million won. 3000, which is almost Rs. 1200Cr increase compared to the previous year. Syrma aims to be at least 70% operational in FY24.
- Syrma has received RDSO approval from Indian Railways. Although the railway’s contribution is currently small, the company expects more business from the railway.
- The company’s Capex in FY23 was around Rs. 170Cr. In FY24, we have planned a capacity of Rs. 200-260 Cr for greenfield expansion.
Fundamental Analysis of Syrma SGS Technology – Key Indicators
Our fundamental analysis of Syrma SGS technology is almost complete. Let’s take a quick look at some important stock indicators.
conclusion
Concluding our fundamental analysis of Syrma SGS Technology Limited, we note that it has shown solid revenue growth over the past four years, driven by strong industry trends. In addition, the company is showing good growth as it has a good order backlog and expansion plans. However, it is important to closely monitor the company’s margins to keep up with sales growth.
What do you think about Syrma SGS Technology? Let us know in the comments below
Written by Aaron Barth
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