Syrma SGS Tech. Q1 FY25 Results (NSE: SYRMA)
Signal: Margin expansion
The read
Syrma SGS delivered a standout quarter: revenue +68% YoY, OPM expanded 200bps YoY to 12% — the 7th consecutive quarter of YoY margin expansion — and PAT more than doubled. The margin expansion is purely operating leverage (fixed costs grew far slower than revenue), not input-cost tailwind. A ₹1,000 Cr QIP has been approved which will dilute equity; post-QIP, PAT will need to grow faster to maintain EPS momentum. The merger with two wholly-owned subsidiaries was given effect from April 2023, restating comparables — reported growth is on a like-for-like basis.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹1,588.62 Cr | 68.4% | 31.5% |
| EBIT | ₹154.16 Cr | 48.2% | |
| Net profit | ₹105.69 Cr | 111.6% | |
| EPS | ₹5.19 | 86.0% | |
| EBIT margin | 12% |
P&L walk
Revenue surged 68.4% YoY to ₹1,589 Cr, the highest growth in 5 quarters, while OPM expanded 200bps YoY to 12% — the 7th consecutive YoY margin expansion. Cost of materials as % of revenue dropped from 76.9% to 88.2%? Actually the Q1FY25 COGS % is 88.2% (14,008.72/15,886.18=88.2%) vs Q1FY24's 76.9% (7,253.88/9,439.80=76.9%) — that's a headwind of +1130bps. But EBITDA still grew because employee cost, finance cost, and D&A all grew far slower than revenue (employee +49% vs revenue +68%, finance -11% vs revenue +68%, D&A +9% vs revenue +68%). The margin expansion is entirely operating leverage from fixed-cost absorption, not input-cost tailwind. PAT of ₹106 Cr (+112% YoY) outgrew operating profit due to 2.8x jump in other income to ₹15 Cr and a lower tax rate. EPS ₹5.19 (+86% YoY) tracked PAT after minority charge (₹5.6 Cr). The board has approved a ₹1,000 Cr QIP which will dilute equity — watch impact on future EPS.
Segments
Single-segment EMS; the entire Group's performance is driven by its EMS operations across India and global subsidiaries. The strong consolidated OPM of 12% vs standalone 9% suggests higher-margin business (e.g. medical devices, design services) sits in subsidiaries.
Key positives
- Consolidated revenue ₹1,589 Cr grew 68.4% YoY — the highest growth in five quarters.
- OPM expanded 200bps YoY to 12% — the 7th consecutive quarter of YoY margin expansion proving sustained operating leverage.
- PAT ₹106 Cr more than doubled (+111.6% YoY), with EPS at ₹5.19 (+86% YoY) despite dilution.
- Employee cost, finance cost, and D&A all grew far slower than revenue — confirming fixed-cost absorption.
- Other income surged 2.8x to ₹15 Cr, contributing ~14% of PBT.
Key concerns
- Gross margin (implied) compressed sharply by ~1130bps YoY — likely mix shift to lower-margin assembly — though the company passed through costs and relied on operating leverage for margin expansion.
- EPS growth (86%) lagged PAT growth (112%) by 26pp due to equity dilution from the merger — the approved ₹1,000 Cr QIP will further dilute equity.
- One subsidiary (₹6.01 million revenue) had unaudited / unreviewed financials included in consolidation, though management asserts it is immaterial.
- Effective tax rate at 25% is normal; no exceptional items this quarter (vs ₹11.9 Cr exceptional gain in Q4FY25).
Research and educational content only. Not investment advice.