Syrma SGS Technology tanks 16% after Q4 results; ICICI Securities cuts target price

In the last one year, Syrma SGS Technology stock has risen around 28 percent, compared to 20 percent rally seen in the benchmark Nifty 50.

Shares of Syrma SGS Technology nosedived 16 percent on May 13 after the company reported subdued results for the quarter ended March 2024. Its net profit grew six percent on-year to Rs 452.14 crore and revenue from operations rose 67 percent YoY to Rs 1,134.09 crore in Q4FY24.

The company's EBITDA margin, however, contracted 222bps YoY due to higher commodity costs, and change in revenue mix.

The EBITDA margin decline is due to a focus on high volume-based automotive and consumer business with relatively lesser margins, and higher input prices, according to ICICI Securities.

Syrma SGS Tech's profitability during the January-March quarter was impacted due to higher depreciation and finance costs, the brokerage noted.

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"We believe revival in the healthcare segment and operating leverage benefits may revive margins in FY25/26," it said.

Strong revenue growth in Q4 was led by around Rs 100-crore revenue shift from December 2023 to January 2024 and high demand momentum across all segments. The company's healthcare segment posted robust 147.6 percent YoY growth on a favourable basis, indicating early signs of revival.

Higher revenue in the healthcare segment is margin accretive, said ICICI Securities.

The cumulative contribution of volume-based segments of automotive and consumer has increased substantially over the past two years. It is likely to have weighed on margins, the brokerage said. Meanwhile, export segment revenue contribution stood at 23 percent and 26 percent in Q4 and FY24, respectively.

"We believe Syrma is likely to continue its strong revenue growth momentum over the next two years led by strong order book and capacity expansion," ICICI Securities said.

However, analysts cut their earnings estimates to factor in lower profitability. They remained constructive on Syrma and maintained a 'buy' rating on the stock with a revised DCF-based target price of Rs 600, down from Rs 675 earlier.

Also Read | Advanced Enzyme slumps 6% as net profit drops in Q4

At 2:15 pm, Syrma SGS Technology shares were trading 15.8 percent lower at Rs 397.85 on the National Stock Exchange (NSE). In the last one year, the stock has risen around 28 percent, compared to 20 percent rally seen in the benchmark Nifty 50.

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