Syrma SGS Technology dazzles on debut, stock soars 34% against issue price

Analyst at Swastika Investmart attributed the good listing to positive market sentiment, outstanding prospects, and a good response from the investors.

Shares of Syrma SGS Technologies (Syrma) soared 34 per cent to Rs 295 against its issue price of Rs 220 per share on debut in Friday’s intra-day trade. The stock of industrial electronics company listed at Rs 262, a 19 per cent premium when compared to its issue price on the BSE. On NSE, the stock started trading at Rs 260.

At 10:28 am, Syrma traded 31 per cent higher at Rs 288.40, against its issue price. A combined 31 million equity shares had changed hands on the NSE and BSE.

Syrma is one of the fastest growing electronics system design and manufacturing companies. It is engaged in the turnkey electronics manufacturing services (EMS). The company has a large product portfolio, which includes printed circuit boards, RFIDS, electromagnetic, electromechanical parts and other products such as SSDs, USB flash drives, etc. Its products are primarily focused towards end-use industries such as automotive, healthcare, IT, industrial appliances and others.

India’s EMS industry is likely to grow at a healthy CAGR of 30 per cent from Rs 2,654 billion in FY21 to Rs 9,963 billion by FY26. The strong growth is expected to be driven by robust demand for electronic products across all industries (automotive, consumer products, capital goods/ power) where Syrma is present.

The Syrma’s wide product portfolio aids faster customer addition and wallet share gains from existing customers. The company established relationship with diverse customer base across the world. Syrma is backed by a robust supplier network. Its suppliers are spread across 21 countries (apart from India), including US, Singapore and China. Increased focus on R&D to optimise current product offerings and launch of new products. The increased R&D spends to help the company increase its ODM revenue share are key triggers and highlights of the company, analysts at ICICI Securities said in IPO note.

“Syrma’s good listing can be attributed to positive market sentiments, outstanding prospects, and a good response from the investors.  With a huge focus on R&D-based innovation and an experienced management team, the company has managed to enter into various growing segments like PCBA, Radio Frequency Identification (RFID), Electromagnetic and electromechanical parts, and other information technology-related products,” said Santosh Meena, Head of Research, Swastika Investmart post listing of Syrma.

The company’s geographically diversified manufacturing locations and the business model which starts from product concept design & focuses on every segment of the overall industry value chain give them a competitive advantage over other players.  The issue was priced at a P/E of ~65X (Based on the Restated Consolidated Financial Information, RHP).  However, we believe that the company deserves this premium multiple due to its phenomenal growth prospects, the brokerage firm added.