Syrma SGS Tech.

Syrma SGS Technology reported a robust Q1 FY26 with consolidated revenue of approximately ₹960 crores, a slight increase from ₹947 crores in the previous quarter. The company achieved a significant EBITDA margin of 10%, up from 5.2% in Q1 last year, representing a 75% YoY growth in operating EBITDA to ₹96 crores. Gross material margin also saw substantial improvement, rising to 24% from 15% YoY, driven by a healthy business mix and operational efficiencies. PAT for the quarter stood at ₹50 crores, a 145% YoY growth.

The company continued its strategic recalibration, shifting focus towards higher-margin segments. Automotive and Industrial segments now account for 24% (up from 16% YoY) and 30% (up from 19% YoY) of Q1 FY26 revenue, respectively. Conversely, the low-margin Consumer business saw a planned decline to 34% from 53% YoY, with a full-year target to bring it down to 30% of total revenue. Healthcare also saw a bump from 5% to 7% of revenue, while IT and Railways remained muted.

Syrma announced a joint venture for PCB manufacturing, targeting India's $5 billion market, 90% of which is currently imported. Phase-1 CAPEX is estimated at $91 million over 3-4 years, with an initial $30-35 million expected in the next 12-18 months. The JV aims for 15-18% EBITDA margins (stabilized) to 18-20% (higher layer business) and around 20% ROCE, benefiting from state government subsidies (35-60% of CAPEX) and PLI schemes. Project execution is expected to commence by September 2025, with commercial production by Q4 FY27 or Q1 FY28.

Exports in Q1 FY26 grew 29% YoY to ₹233 crores, constituting 24.5% of total operating revenue, primarily to Western Europe and North America. Despite this growth, management noted that tariff uncertainty is currently holding back larger orders. The company maintains its FY26 export target of crossing ₹1,000 crores and expects India to be favorably positioned post-tariff clarity, viewing tariffs as a potential opportunity for increased market share. The export to the U.S. is currently 5.5-6% of total exports.

Net working capital days remained at 69 in Q1 FY26, with a target to reduce it below 65 days for the full year, aiming for 60-63 days. The gross debt stood at ₹780 crores, with a healthy treasury balance of ₹467 crores, resulting in a net debt of ₹314 crores as of June 30, 2025. The increase in net debt by ₹50 crores this quarter was primarily due to incremental working capital requirements for new industrial and automotive projects, which require more inventory stacking.

The company reiterated its FY26 guidance for 30-35% revenue growth and an improved EBITDA margin of 8.5-9%. While IT and Railways were muted in Q1, they are expected to pick up, with Railways targeting ₹80-100 crores for FY26. The Smart Meter business recorded ₹55-60 crores in Q1 and is projected to reach ₹250-300 crores for FY26. Overall capacity utilization is expected to be 65-70% for FY26, including new capacities at Pune, Bawal, and Chennai.

Syrma expressed strong interest in the defense sector, viewing it as a strategic vertical aligned with the 'Make in India' initiative, though current contributions are negligible. The company is actively pursuing opportunities to become an EMS partner for large defense players, focusing on providing solutions and modules. In the laptop business, Dyna production is starting this month or August, while MSI production for the Indian market is ongoing, with negotiations to supply for the global market. The current laptop assembly is not PLI eligible, but manufacturing motherboards could make it so.