Syrma SGS Technology IPO opens on Friday. Here's what analysts said

The Rs 840 crore IPO by Chennai-based engineering and design company Syrma SGS Technology will hit the market on Friday. At least three brokerages have recommended a 'buy' rating on the issue, while Geojit finds the IPO worthwhile from a medium-to-long term perspective. Asit C Mehta Investment Intermediaries advised investors to subscribe to it for listing gains. Choice Broking said subscribe, but with caution.

The Rs 840 crore issue will be sold in Rs 209-220 price band and would be a mix of fresh issue (Rs 766 crore) and offer for sale (Rs 74 crore). It will conclude on August 18.
In May 2022, Syrma made a pre-IPO placement of around 3 per cent equity at Rs 290 per share. At a higher price band, the IPO is valued at a 24.1 per cent discount to the pre-IPO placement price, which may be considered favourably by retail investors, said Choice Broking.


"But the company has demanded an EV/Sales multiple of 2.5 times its FY22 pro forma consolidated sales, which is at a premium to the peer average. Thus the issue seems to be fully priced. Considering the high growth potential in the electronic manufacturing sector, we recommend 'Subscribing with Caution' rating for the issue," Choice Broking said.

The brokerage expects the company to report a 13.2 per cent CAGR in revenues over FY22-24 at Rs 1,621.9 crore. It sees Ebitda and PAT margins expand by 152 basis points and 137 basis points during the period to 11.5 per cent and 7.1 per cent, respectively, in FY24.

"RoIC and RoE are anticipated to expand 168 bps and 198 bps to 6.4 per cent and 7 per cent, respectively, compared with 4.7 per cent and 5 per cent in FY22, the brokerage said.

Syrma SGS Technology provides integrated services and solutions to original equipment manufacturers (OEMs) from the initial product concept stage to volume production through concept co-creation and product realisation. The company has 11 manufacturing facilities and three dedicated R&D facilities. The company's products are sold across 24 countries, including the USA, Germany, Austria, and the UK.

Out of 200 customers catered in FY22, 16 have been associated with the company for over ten years. Syrma’s customer base includes TVS Motor Company, AO Smith India Water Products, Robert Bosch Engineering, Eureka Forbes, CyanConnode, Atomberg Technologies, Hindustan Unilever and Total Power, Europe, among others.

"Considering its good peer financial performance, strong focus on R&D, capacity expansion plans, positive industry outlook with government support through PLI schemes and China plus one strategy of multinational companies, we assign a 'Subscribe' rating on a medium to long term basis," said Geojit Financial services.

Meanwhile, Asit C Mehta Investment Intermediaries, in a note, said India’s EMS addressable market is expected to grow at a CAGR of 30 per cent to $135 billion by FY26 from $36 billion in FY21. India’s EMS market is expanding owing to the China+1 strategy, import substitution, and government incentives like the PLI.

"With its superior product mix, strong R&D capabilities, and adding capacities, we believe Syrma is well placed to capitalize on domestic and global opportunities. At the upper price band of Rs 220, the stock is priced at 50.71 times its FY22 EPS of Rs 4.34. We recommend subscribing to the issue from a listing gain perspective," it said.

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