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Syrma SGS Technology surges 43% on debut. What should investors do now?

Given the healthy returns on its first day, experts advised booking profits if one a short term investor, but investors having patience can hold the stock for long term given the strong outlook for electronic manufacturing sector.

August 26, 2022 / 03:52 PM IST
 
 
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Syrma SGS Technology surprised the Street by its stellar performance on its first trading day as the stock clocked nearly 43 percent return on August 26, thanks to its healthy IPO subscription figures, strong financial performance, diversified product portfolio with strong customers base, and the positive secondary market conditions.

The stock opened at Rs 262 on the BSE, rising 19 percent over its issue price of Rs 220, which was largely on expected lines. And gradually it marched ahead to hit a record high of Rs 314.40, registering a massive 43 percent return, making the investors happy. This price was even better than the pre-IPO placement price of Rs 290 per share.

It closed with 42.3 percent gains at around Rs 313 on the BSE. Given the healthy returns on its first day, experts advised booking profits if one a short term investor, but investors having patience can hold the stock for long term given the strong outlook for electronic manufacturing sector.

"With listing gain above 30 percent, we advise allotted investors should think of booking healthy profits, but if someone wishes to add Syrma on listing day it will be better to wait and watch for better opportunities post listing," Prashanth Tapse, Senior VP Research at Mehta Equities said.

Tapse is optimistic on the electronics export business model, providing a high – value integrated design and production solution for internationally recognized original equipment manufacturers (OEMs).

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The utilisation of fresh issue money, which is 91 percent of total IPO size, is also supporting factor and giving confidence about company's outlook, experts said.

Syrma is a technology-focused engineering and design company engaged in turnkey electronics manufacturing services (EMS), specializing in precision manufacturing for diverse end-use industries, including industrial appliances, automotive, healthcare, consumer products and IT industries.

Also it has established relationships with marquee customers across various countries & state-of-the-art manufacturing capabilities supported by a global supplier network, with a focus on vertical integration.

IPO offer objective is primarily to fund capital expenditure requirements for developing and R&D facility and the expansion of manufacturing facilities. Funds will also be utilized to meet the company's working capital requirement.

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"We still believe that with high focus on high-margin product portfolio and expansion plans ahead, Syrma is well placed to tap increasing demand EMS products globally," Tapse said.

Rajnath Yadav, Research Analyst at Choice Broking also recommended investors to take an exit on the listing. However, patience investors can remain invested given the high growth potential in the electronic manufacturing sector, he advised.

Astha Jain, Senior Research Analyst at Hem Securities recommended to book partial profits if issue lists at 20 percent premium and hold remaining allotment as the company being one of the leading design and electronic manufacturing services companies has consistent track record of financial performance.

Syrma recorded a 16.65 percent growth in proforma consolidated profit at Rs 76.46 crore for the year ended March FY22, and revenue in the same period increased by 43 percent to Rs 1,266.6 crore compared to previous year, largely due to increase in the sale of manufactured goods.

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The company reported revenue growth at a 20.8 percent CAGR during FY20-22 on the back of strong demand traction across the industries and innovation.

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.

"We believe that the company deserves this premium multiple due to its phenomenal growth prospects. Those who applied for listing gains can maintain a stop-loss of Rs 225. New investors can buy for the long term and existing investors are recommended to stay invested in the company," Santosh Meena, Head of Research at Swastika Investmart said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Aug 26, 2022 03:51 pm
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