Q1FY26 Result HighlightsSyrma SGS reported a decent operating performance In Q1FY26, with revenue at Rs.944 cr, down 18.6% YoY largely led by a decline in Consumer/IT and railways business by 49% /50% YoY, but margins and profitability improving sharply due to a favourable business mix shift. EBITDA rose 90.2% YoY to Rs.87 cr, with EBITDA margin expanding 527 bps YoY to 9.2%, aided by higher gross margins (up 985 bps YoY to 24.7%) and a lower contribution from the low-margin consumer segment. PAT surged 143% YoY to Rs.50 cr, supported by better operating performance and higher other income. The company’s strategic focus on high-margin verticals is clearly visible, with automotive and industrial segments now comprising 54% of revenue, up from 35% last year. Automotive revenue rose 18% YoY to Rs.220 cr, driven by increasing traction in EV and ADAS applications, while industrial revenue grew 34% YoY to Rs.290 cr. Consumer segment revenue declined 48% YoY, reducing its share to 34%. Exports grew 29% YoY to Rs. 230 cr (~25% of total revenue), with strong demand in Western Europe and the US. Syrma also entered a JV with Shinhyup Electronics to establish a multi-layer PCB plant, marking a key step in vertical integration and domestic manufacturing expansion.

Key Conference call takeaways

Order Book and Segment Mix

• As of June 30, 2025, Syrma's order book stood strong at Rs. 540–550 bn.
• Automotive contributes the largest share at 35–40%, followed by consumer and industrial segments at 25–27% each.
• The healthcare vertical accounts for 6%, while IT and railways combined make up around 8–9%.

Operational and Financial Metrics

• Q1FY26 capex was Rs. 350 mn, with full-year guidance between Rs. 800 mn to 1 bn.
• Net working capital remained steady at 69 days; management continues to aim for 60–65 days.
• Export revenue reached Rs. 2.32 bn in Q1, up 29% YoY, with nearly 95% of exports going to Rest of World and 5% to the US.
• Original Design Manufacturing (ODM) contributed 12% of Q1 revenue.
• The company received Rs. 40–60 mn in PLI-related incentives during the quarter.

Business Mix and Margin Dynamics

• The strategic tilt towards auto and industrial verticals continues to boost overall margins.
• Despite current softness in IT and railways, these verticals are expected to gain momentum in the coming quarters.
• Export-oriented industrial sales enjoy superior profitability over domestic counterparts, and both outperform the consumer segment in terms of margins.

Product-Level Insights

• Smart meter business delivered Rs. 550–600 mn in Q1 revenue, with FY26 guidance in the Rs. 2.5–3 bn range.
• Railways, a cyclical segment, generated Rs. 200 mn this quarter; FY26 revenue expected between Rs.800 mn–1 bn.
• Added new box-build customers serving both domestic and export markets.
• Automotive growth is supported by onboarding new clients and deeper product penetration with existing ones, especially in the EV segment where Syrma is a Tier-1 supplier.

PCB JV with Shinhyup Electronics

• The JV targets a PCB manufacturing facility with 1.5–2 million units of annual capacity, across single, double, and multi-layer boards.
• Phase 1 involves a USD 91 mn capex over 3–4 years
• The JV benefits from PLI and state incentives, covering up to 60% of the investment.
• Margins for basic PCBs are in the 12–15% range, potentially increasing to 18–20% with multilayer scaling.
• The plant will cater to auto, industrial, and consumer electronics, though it will not participate in the mobile phone space due to absence of HDI PCB manufacturing.
• Targeted asset turnover lies between 1.2x to 2x, with regulatory approvals anticipated by September 2025.

Outlook & valuation

Syrma SGS reported a decent operating performance In Q1Fy26, with revenue at Rs.944 cr, down 18.6% YoY largely led by a decline in Consumer/IT and railways business by 49% /50% YoY, but margins and profitability improving sharply due to a favourable business mix shift. EBITDA rose 90.2% YoY to Rs.87 cr and margin expanded 527 bps to 9.2%, driven by a favourable shift toward higher-margin automotive and industrial verticals, which now form 54% of total revenue. PAT surged 143% YoY to Rs.50 cr, also supported by higher other income. Gross margin improved 985 bps YoY to 24.7%. Exports grew 29% YoY to Rs.232 cr, while ODM revenue stood at 12%. With a robust Rs. 540–550 bn order book with ~70% share from high-margin segments, Syrma is steadily repositioning itself toward margin-accretive, value-added segments.

We like Syrma because of its strong focus on R&D and innovation, its diversified and expanded product portfolio, its focus on high-margin products, and established relationship with clients. Syrma reported healthy earnings growth in FY25 and upbeat guidance backed by a robust order book and expanded capacity affirm our positive stance on Syrma. Client additions offer long-term revenue visibility while strong domestic demand supports the short-medium term outlook. The company plans to partner with credible technology players under the Electronic Components Manufacturing Scheme (ECMS).  Management has guided for 30-35% revenue growth and EBITDA ~8.5%-9% EBITDA margins for FY26 (vs 8-8.5% margin earlier). We believe that the company’s long-term trajectory will continue to be strong, backed by: 1) its focus on low-volume, high-margin business; 2) robust order book 3) an increase in exports; 4) the addition of new customers in the industrial and automotive segments and 5) a foray into bare PCB manufacturing through its JV. At a CMP of Rs.728, the stock is trading at 41x FY27E. We maintain a HOLD rating on the stock.