Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

Astra Microwave

Business

Astra Microwave Products Limited (Astra) was incorporated in 1991 by a team of distinguished scientists with experience in RF/Microwave/Digital Electronics and management of projects with high technology content. Astra Microwave Products Limited, engaged in the business of design, development and manufacture of RF and Microwave Components, sub-systems and systems used in defense, space, meteorology and telecommunication

With over 30 years of experience in microwave radio frequency (RF) applications, AMPL has moved up the value chain from sub-systems to high value-added systems

Astra has 3 Automatic assembly lines for PCBA assembly, 5 class 10K cleanrooms, functional test infrastructure that extends from 30MHz up to 40GHz, in-house Environment test facilities including EMI/EMC facility and a first for any Indian Private Industry – Near Field Antenna test and measurement range.

Total workforce (as on March 31st, 2023) – 1,290

Subsidiaries

In fiscal 2014, AMPL floated the 100% owned BEPL as a captive supplier of raw material for overseas orders. In fiscal 2015, AMPL floated the 100% owned ASPL in Singapore, as a supplier of MMIC products for semi-conductors. In fiscal 2019, AMPL set up a joint venture, Astra Rafael Comsys Pvt Ltd, with Rafael Advanced Defence Systems for production of communication systems and sub-systems for defence.

Product Portfolio
The company’s product portfolio spans across Defense, Space, Meteorology, Homeland Security and Systems Vertical

Has a diverse range of microwave products like filters, transmitters, receivers, antennas etc.

Manufacturing facilities

5 facilities in Hyderabad, Continuous investment in World Class Infrastructure for Assembly, Functional and Environment testing. Astra’s facilities are approved by several foreign companies for production

R&D Capabilities
Track record of new product development; now graduated to a SYSTEM integrator in Radar. Dedicated R&D facility at Bengaluru to manufacture radars

Strong in-house capability in the microwave radio frequency (RF) applications domain.
Executes orders through BTS (Build To Specifications) and BTP (Build To Print) route

Customers and Regions of Revenue

• Clientele includes Indian Government Laboratories, Indian Defense
• Public Sector Undertakings, Indian Space Research Organization
  and many foreign OEM’s

Revenue mix

Geographical spread of total revenue stands as follows: India – 60% and Exports – 40%

Applications

Defense

• Radars
• Electronic Warfare
• Missile Electronics
• Telemetry
• Counter-Drones

Space

• Flight Model Application
• Ground based
  Application
• INSAT MSS Terminals

Hydro/Meteorology

• Water Level Measurement (Bubbler/
  Radar Sensor)
• Automatic Weather Stations (AWS)
• Agromet Met Stations (AMS)
• Automatic Rain Gauge (ARG) X
  Band Doppler Weather Radar

Other areas of work

• Antennas
• MMIC
• Contract Manufacturing
• Homeland Security

Awards and Certifications

The company has various certificates such as AS9100D & BS EN ISO 9001:2015, ISO27001:2013, ISO9001:2015, ISO14001:2015, ISO45001:2018, ISO/IEC17025:2017.

Awards

LAToT Ceremony for Coastal Surveillance Radar

Excellence in Innovation, Design Technology, R&D 2021

Counter-Drone System LAToT Handing over Ceremony

Award for Excellence in Aerospace lndigenisation-2021

ELCINA EFY Award for Business Excellence

Fundamental Ratios, Cash, Loans, EBITDA,PAT etc

Debt to equity is under control < 1

ROCE> 17

Pledge 0%

Short and long term liquidity under control

Recent Q1FY24 have been weaker than expected

Opportunity Size

Various tailwinds in the defence sector are creating a wide range of opportunities for Indian firms. Company expected to hit 6000-8000cr cumulative revenue in next 5 years if TAM is correctly addressed

Triggers

Defence spend in India has received a mega boost
Opportunities to develop and supply products which are published as negative import list by GOI
Government of India’s Atma Nirbhar Bharat initiatives

Favorable policy initiatives like Buy (IDDM – Indigenously Designed, Developed and Manufactured),MAKE-II, MAKE-Ill

Expansions and Acquisitions for future growth

QIP has been done at 270 rs for Reducing working capital and corporate purposes

Operating margins can improve further

Focusing on domestic defense order can lead to 20% OPM in coming years.

We aim to achieve 70% Domestic 30% Export Revenue distribution over next 2-3 years. Domestic business on an average carries 40 to 45% of gross margin as against 8 to 10% gross margin in exports.

Order inflows

Orders are worth an aggregate amount Rs. 158 crores for supply of Software Defined Radio (SDR) by Astra Rafael Comsys Private Limited (Joint Venture) Company has received an order from India Meteorological Department (IMD) for Supply of C-Band Dual Polarized SSPA based Doppler Weather Radars for a total value of Rs.32.97 crores. Order is to be executed within a period of 18 months.

Orderbook as of March 2023 is Rs. 1,544 crores. This order book consists of only 24% of export orders rest 76% are domestic orders. The BTP segment is a major contributor of our export orders, which are executable in the next 24 months. The sales mix is anticipated to be skewed towards domestic, high margin business.

Orders are worth an aggregate amount order(s)/contract(s) awarded in brief; of Rs.16.8 crores for supply of Satellite sub-systems and weather data processing system from ISRO

Company has bagged orders worth Rs.158 crores for supply of Satellite sub-systems, Airborne Radar and sub-systems of Radar and EW projects, from DRDO, ISRO and DPSU’s

Targeting JV and exploring fields like

Through JV or strategic alliances, offer improved technology and products.
Target the offset requirement in large defence procurement programmes of Gol.
In discussion with our JV partners to develop EO (electro-optics) product line. Bidding for the whole system – the complete radar system – for both DRDO and for future MoD requirements

Risks

Lumpy nature of domestic defence/space programs –Orders come in bulk and so are the payments.

Large working capital requirement: Gross current assets (GCAs) improved to 346 days as on March 31, 2022, from 398 days a year before, led by reduction in debtor days. GCAs are expected at around 400 days over the near to medium term with increased execution of domestic orders. The group primarily caters to domestic defence research and space establishments that usually have a long production cycle and longer working capital cycle compared with overseas orders. Though export revenue may be realised faster, it will be offset by stretch in receivables from domestic orders as domestic order execution is expected to increase in the future and thus working capital intensity would be a key monitorable. Furthermore, the group must maintain sizeable inventory to cater to all segments, as products are customised, and thus, requirements vary across segments.

Susceptibility to risks inherent in a tender-based business, and long gestation period for projects: The business depends on success in bidding for tenders invited by defence public sector undertakings and research establishments. Establishments such as the DRDO invite tenders from qualified vendors for their R&D requirement and commence bulk production on successful completion of product development. Long-term revenue visibility is primarily driven by the success of R&D projects at DRDO and the subsequent mass production of products.

Margins Volatility is high. Export vs domestic order execution changes margin profile and needs to be seen closely in coming quarters

Technicals on 25th Aug23

Disclosure –Invested. Do your own diligence before buying/selling

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

In case you have any questions/ queries, please feel free to reach me through Contact Form

Do spread the word among your peers, family members or anyone who can benefit from this blog and asked them to subscribe. But be selfish and take care of yourself first by subscribing before they do.

Enjoy the day and your life. Don’t forget, we are alone in this grand universe and may not get a chance to live again.

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

Business

Pricol Limited is an auto component supplier headquartered in Coimbatore, Tamil Nadu that manufactures various products such as driver information systems, oil/water pumps, chain tensioners, cab tilts, fuel sensors, temperature/pressure sensors, speed limiting devices, and wiping systems. Company is the world’s second largest DIS manufacturer for 2 wheeler.

The promoters, and related family members/family-owned entities hold a 36.53% stake in Pricol.

Manufacturing facilities

9 Manufacturing Locations, 8 Manufacturing Plants in India , 1 Subsidiary Plant in Indonesia. 3 International Office in Tokyo, Singapore & Dubai

Two direct subsidiaries in Indonesia (produces and markets instrument clusters, oil pumps and fuel sensors), and Singapore (procurement arm).

R&D Capabilities

2 Technology Centers at Coimbatore, ~ 4.5% spend on total revenue for R&D, As of march 2022, co. has made 13 inventions for which 18 patents have been filed. Out of which 12 are granted and remaining are under review.

Employee strength 850+, Engineers 300+

Customers and Regions of Revenue

Two-wheelers accounted for 61% of revenues and domestic sales constituted over 90% of its revenues in FY2022. Exports as a % of total revenues have dropped from ~30% to ~10% from FY20 to FY22. primarily due to divestment of various loss-making foreign subsidiaries.

In FY21 , DIS and pumps & mechanical products accounted for 50% and 33% of consolidated revenues respectively. Target is to take it to 70:30 ratio

Awards and Certications

Leading Industry Certifications IATF 16949:2016, ISO 14001:2015, ISO 45001:2018

Pricol has been recognized with the “Business Innovation” Award by the Confederation of Indian Industries (CII) Tamil Nadu for the various innovations done on Driver Information and Connected vehicle solutions

Award received from Honda Motorcycle and Scooters India “Best Delivery Management”

Award From TATA Motors (TML) on 07-Sept-2022

Award received under the category “Technology Excellence Award 2022” for the Best Interactive Product in Automotive.Award From Quantic India on 14-OCT-2022

Award From Hero MotoCorp on 07-NOV-2022. Award received under the category “Best In Innovation & Technology” at the Hero – NEXT 22

TOP 50 INNOVATIVE COMPANIES
Confederation of Indian Industries (CII) awarded Pricol as one of the “TOP 50 INNOVATIVE COMPANIES” as a part of Industrial Innovation award 2022

Product verticals

Driver information and Connected Vehicle solutions

This vertical is having products which are becoming need of every vehicle, 2W, 4W, CV, PV, LCV. Next stage could be CV, 3W and EV penetration

Moreover with EV domain coming up, this vertical has more legs

Customers

All Major customers are their clients

Experienced promoters and established track record of the company

Fundamental Ratios, Cash, Loans, EBITDA,PAT margin, Shareholding pattern

PAT transformation is sustained and growing, OPM got stable at 12%, we can expect OPM in range of 10-15% in coming years. Chances are it might get stable at 13-14% in next 2-3 years. EBITDA margins target of 15% from company side

ROE is improving over last decade and stands at 18%, ROCE at20%

Stable Cash conversion cycle and Working capital days are just under 25

Shareholding pattern

Low retail presence

IN house excellence

MANUFACTURING EXCELLENCE
PCB Assembly with SMT Lines
Robotic Lines with EOL Testing
State of the art Tool Room
Plastic Injection Molding
Pressure Die Casting
Machine Building
Sintering

Subject Matter Experts in Electronics
(Hardware & Software), Mechanical and
Electro-Mechanical domains
ASPICE level 2 practices

TESTING EXCELLENCE
EMI – EMC
Hil Lab
Environment
Endurance
Product Reliability

Triggers

Key partnerships of company with SIBROS, BMS, Technology provider, PSG institutions and Candera CGI studio can propel the company technically and come up with advanced products and solutions

Below snippet is from Q1FY23 Confcall Aug22 —talking about 12-36 months for different engines to fire

So 9 months has passed from that time.

New product launches in Q4FY23

In FY22, co. has launched certain new products, including some marking products especially for TVS on their iQube, the electric vehicle, a seven inch TFT the first of its kind, a hybrid TFT plus LCD instrument cluster, among others

Increase in exports to 20% of revenue

Exports as a % of total revenues have dropped from ~30% to ~10% from FY20 to FY22. Currently Plan of company is to take to 20% by 2025. Big deal with Caterpillar done and things will roll out in coming years

Capacity Enhancement and new machines

Production capacity enhancement in Tool room, Plastic Component Manufacturing Shop and SMT (Surface Mount Technology) for PCB assembly line by adding new machines.

Acquisition of shares by Minda

Minda holds 15.7% and wants to increase till 24.5%, That can trigger an open offer and push share price might move up. As of now Pricol is opposing the deal

Diversified product profile comprising of driver information systems, pumps and mechanical products mitigates product-specific risks to a large extent

Established relationships with OEMs with healthy share of business – Pricol is a reputed player in the Indian auto component industry with presence for over five decades and supplies to original equipment manufacturers (OEMs) like Hero MotoCorp Limited, TVS Motor Company, Bajaj Auto Limited, Ashok Leyland Limited and Tata Motors Limited.

Company has the target to reach 4000cr revenue by FY26. The company has an order pipeline for the next 3 years

Past Disposal of loss-making businesses–No overhang there
In order to reduce debt, co. has disposed off certain loss-making businesses and divested subsidiaries, for example, co. disposed off its Wholly Owned Subsidiaries – PWS India and Pricol and Pricol Espana in 2019 and 2020 respectively.
It has written off ~400 crores in the process of selling its loss-making foreign businesses

Venturing into new markets
Co. has plans of Venturing into motors and actuators, such as new sensors and newer technologies in driver information systems, like areas in EV vehicles and they have identified certain areas. 
In FY22, co. has won many new businesses across various segments including products like Connected Vehicle Solution and around 10 % of the revenue of FY 22 was contributed by new business

PLI scheme approval and CAPEX plans

Pricol is approved for PLI (Production Linked Incentives) Scheme The PLI scheme (outlay of $ 3.5 bn(or)Rs 25,938 crore) for the automobile sector proposes financial incentives of up to 18% to boost domestic manufacturing of Advanced Automotive Technology (AAT) products and attract investments in the automotive manufacturing value chain…PRICOL LIMITED is approved by the Ministry of Heavy Industries(MHI) for the Component champion Incentive scheme

From Aug22 confcall

Targeting Exports and EV segment India’s growth story will be muted in the next 3 years for 2W auto segments; the company’s target is export. Company has a LOI for next 30 months and on the basis of that company projected the target of 4000cr. The company is working on premium products so even at low volume growth the target will be achieved. 8. Company is EV ready and in touch with all EV players in India. Currently 8% revenue is from EV in the DIS segment. Working with 22 EV players in the country. Margins are same from EV as well; also share of EV will go up as EV adoption increases in India

Demerger possibilities to unlock value To unlock value for shareholders, if there is a need to align with some other company to get technology from MNC players, then Pricol may demerge into 2 different companies for DIS and other businesses

Risks

Muted growth in Indian 2W Market

Company has shared at multiple times that next 2-3 years they expect muted growth in Indian 2W market, though with supply of premium products and margin, company may grow better than industry

Exposure to volatility of raw materials and forex rate fluctuations due to high reliance on imports
Semiconductors and electronic components account of ~20% of Pricol’s raw material requirements. Supplies have eased out in last few months. But any recurrence can again lead to volatile times

Heavy Dependency on few customers

High segment concentration with 2W contributing to over 70% revenues– Pricol continues to derive 70% of its revenues from the 2W segment, and 57% of its revenues from its top three customers. Further, over 90% of the revenues are from the domestic market

Heavy dependency on top 5 customers and top 12 customers for business –>12 strategic customers contributing to about (+) 85% for sale and we continue to
grow with all of these 12 customers and our primary sales are driven by these 12 customers comprising of two wheelers primarily followed by commercial vehicles and then passenger cars.

Hostile takeover bid by Minda

This creates an Overhang and use Management Bandwidth in wrong direction. Can lead to company stock price going nowhere

Technicals on 21st May

ALSO READ : Company at Y2K moment

ALSO READ : Dream come true

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

In case you have any questions/ queries, please feel free to reach me through Contact Form

Do spread the word among your peers, family members or anyone who can benefit from this blog and asked them to subscribe. But be selfish and take care of yourself first by subscribing before they do.

Enjoy the day and your life. Don’t forget, we are alone in this grand universe and may not get a chance to live again.

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

Business

Incorporated in 2004, Syrma SGS Technology Limited is a Chennai-based engineering and design company engaged in electronics manufacturing services (EMS). The company provides integrated services and solutions to original equipment manufacturers (OEMs) from the initial product concept stage to volume production through concept co-creation and product realization

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. They are leaders in high-mix low volume product management and are present in most industrial verticals

Product Portfolio
– Printed circuit board assemblies (PCBA)
– Radio frequency identification (RFID) products
– Electromagnetic and electromechanical parts
– Motherboards
– Memory products – DRAM modules, solid state, and USB drives.

Manufacturing facilities
The company operates eleven manufacturing facilities in North India (Himachal Pradesh, Haryana, Uttar Pradesh) and South India (Tamil Nadu, Karnataka). The manufacturing facilities in Tamil Nadu are located in a special economic zone. The manufacturing facility in Haryana has been set up under the Electronic Hardware Technology Park scheme, which allows the company to avail of tax and other benefits.

R&D Capabilities
Co. has 3 dedicated R&D facilities, 2 of which are located in Chennai and Gurgaon, and one in Stuttgart, Germany. R&D efforts are focused on

(i) developing new products and improvement of the quality of existing products, and

(ii) driving the design and engineering capabilities and original design manufacturing capabilities of the company.

Customers and Regions of Revenue

TVS Motor Company Ltd., A. O. Smith India Water Products Pvt. Ltd., Robert Bosch Engineering and Business Solution Pvt Ltd., Eureka Forbes Ltd Limited, CyanConnode Ltd., Atomberg Technologies Pvt. Ltd., Hindustan Unilever Ltd., Total Power Europe B.V.
Company’s products are sold in 25+ countries, including USA, Germany, Austria, and the UK. In FY22, exports contributed 55% of the revenue.

Awards

Dec’22 Best EMS Supplier 2022 Award by Pricol
Nov’22 Innovation & Technology Excellence Award by Wabtec Corporation
Oct’22 Award for Techno Visionary – Industry for the Year 2022

Experienced promoters and established track record of the company
Syrma belongs to the Tandon group, which started its first manufacturing unit in 1976 for the manufacture of floppy drives for IBM. The unit was the first hard disk drive (HDD) manufacturing unit in South Asia then. Mr Sandeep Tandon, Chairman of Syrma, has over two decades of experience in the electronics industry. By 2000, the group diversified to high-volume electronics manufacturing services for leading IT majors of the world. The group’s range of products includes printed circuit boards (PCBs), magnetic disk drives, magnetic coils, RFID tags, etc. The promoters of the acquired entity – SGS – have more than three decades of experience in the electronics manufacturing industry, with operations across six manufacturing facilities. The company is led by four directors, who are also its founders. The promoters of the company are professionally qualified and have degrees in electronics engineering/management from reputed institutions. Mr J S Gurjal, who was the promoter of SGS, is now the Managing Director of Syrma.

Industry and prospects
The global EMS market traditionally comprised of companies that manufacture electronic products, predominantly assembling components on PCBs and box builds for OEMs. EMS differs by service providers, and any particular partner may provide any combination of the following: PCB assembly, cable assembly, electro-mechanical assembly, contract design, testing, prototyping, and aftermarket services. The market in India is highly competitive and there are more than 30 organized companies in the EMS industry, but the commercial semi-conductor fabrication operation is almost non-existent. The competition concentration is moderate as the top three companies account for about 30% of the market. The companies follow either of the two unique business models – high volume/low mix or low volume/high mix.
In terms of government initiatives for the sector, the Indian Government is attempting to enhance manufacturing capabilities across multiple electronics sectors and to establish the missing links in order to make the Indian electronics sector globally competitive. India is positioned not only as a low-cost alternative but also as a destination for high-quality design work. Many multinational corporations have established or expanded captive centres in India. Post the COVID-19 pandemic, many global electronics manufacturers are contemplating on the China+1 strategy and looking for alternate manufacturing locations for exports business, which is advantageous to Indian manufacturers. Syrma’s presence in the ODM segment offers the company a better position and margins. However, the company’s ability to scale up operations amid the improved demand for the sector and the capability of the company to manage the shortage of raw materials and the working capital cycle remains key to the prospects

Revenue mix

Quarterly basis

Nine month basis

Current mix of the Auto, Consumers, Healthcare , Industrials, IT and Railways

Fundamental Ratios, Cash, Loans, EBITDA,PAT margin, Shareholding pattern

Company has sufficient Cash to grow

Stable PAT and EBITDA margins , ROCE is approx 13%

Opportunity Size

The Indian ESDM market is expected to grow at about 40% annually. The company expects to grow in line with industry growth rates.

Triggers

The company IPO has given sufficient cash for capex. Capex will involve around Rs.38 crore for setting up a R&D facility in Chennai, Rs.108 crore for setting up and expanding the manufacturing facility at the Chennai Plant, around Rs.52 crore for setting up new manufacturing facilities in Hyderabad, around Rs.228 crore for setting up and expanding of manufacturing facilities in Manesar, around Rs.62 crore for setting up new facilities in Bawal, and around Rs.83 crore for setting up new facilities in Hosur.

Q3Fy23 bringing up our new facility in Manesar and Chennai for the design and development

Incorporation of new subsidiary

Syrma SGS Electronics Private Limited is incorporated as a wholly owned subsidiary of the Company on March 03, 2023

To carry on the business of designers and manufacturers, buyers, sellers, assemblers, exporters, importers, distributors, agents, and dealers in memory chips, memory modules, PCB assemblies and other storage products, printers, readers magnetic or otherwise, CRT displays and terminals and all other electronic and communication equipment and parts, components, assemblies and subassemblies to be used in the computer and electronic industry
including voice coils, voice coil actuator assembly, antenna coils, smart cards and radio frequency identification devices.

Acquisitions of SGS and PerfectID

This is playing out already in right direction as businesses acquired are complementary

Syrma acquired a 20% stake in SGS in November 2020. Funds of Rs.92.04 crore from private equity funds and other shareholders have been infused in Syrma in FY21, partly as equity and partly as preference capital, which has been utilised for the purpose of inorganic growth by way of acquisition of SGS. The erstwhile promoters of SGS now hold 9.23% share each in Syrma, totaling to 37%.
SGS, incorporated in 1986, is an Indian EMS company that primarily assembles PCBs for its clients. In terms of customer and geographical profile, there is no overlap between Syrma and SGS, thereby diversifying the segment and client profile on a consolidated basis.

Syrma also acquired 75% stake in Perfect ID India Private Limited in October 2021. PerfectID manufactures RFID label tags and passive inlay tags, which is in addition to the existing capabilities for the manufacturing of RFID hard tags, thus expanding the RFID products portfolio.

PLI approvals

Company has received 2 PLI application Approvals in the telecom and in white goods air conditioning sector. As of date, the telecom PLI investments are on track, new facility at Manesar has been commissioned, it has gone into production in the second quarter of FY23 and expect huge traction in that business going forward in the coming quarters. The air conditioning PLI for products are under validation and it would be some quarters before we see any outcome. Products for the Indian market both inverter and non-inverter are under validation.

Company is focused on building out more ODM type development with current and new customers.

Very strong audits done by new marquee customers throughout facilities are done, so company is expecting new business to roll in over the next six to nine months with those customers

Order book size 1700 cr Sep22, 2100cr in Dec22–which is executable within 12 months is about Rs.1800 Crores and the spillover is about Rs.300 Crores

Capacity utiliation of old plants 75% approx, new plants commisioned approx 50%

Top 10 client concentration is 47% Dec22

In future margins increase can come from healthcare shipments which is export oriented business, or box build assemblies going more or asset turn increases with more production line and bulk order in consumer segment

Company is the single source for a lot of customers

Company is expecting rebound in Europe in two quarters

The growth is primarily led by continuous efforts on design lead manufacturing and has broadly been across sectors, but led by auto and consumer. The growth in a few sectors like healthcare and exports has been muted and slow because of the recessionary conditions and inflation in Europe, but we are very confident on the long term story and expect this to rebound in the coming quarter or two quarters.

Q3Fy23 call

Consumer growth business is primarily lead by our entry into the fiber to home devices and the telecom PLI scheme and the visibility which we have received makes us confident that this will lead to a sustainable growth in this segment in the coming quarters. It is not a one off growth, but a sustainable growth and we have also added more technology partners in this segment, which will further broaden the base and derisk the segment from the risk of a particular technology partner going down or a customer going down so we are broadening the base on this front.

In the automotive, the higher traction of growth will be in the EV segment

Next cycle of growth from EV charging infra and energy storage infra

Risks

High Valuation in short term

One needs to keep long term view, buy as SIP for risk mitigation of valuations

Exposure to volatility of raw materials and forex rate fluctuations due to high reliance on imports
Syrma’s raw materials consist of many components, including ICs, among others. Majority of the components, chips and PCB ICs, are imported and Syrma has the liberty to choose the buyer in most cases. Most of the contracts of Syrma with its suppliers are back-to-back contracts. Also, though the prices with most of Syrma’s customers are negotiated and agreed to initially, they are reviewed regularly. Recent times have seen a severe shortage of key components like ICs and this may also impact the operating margins and the working capital cycle of the company. Due to the high lead time for chips, which extends up to 52 weeks in some cases, the inventory-holding has increased. The company has to make advance payments in some cases to secure the raw materials, which has increased the working capital borrowings of the company. In the short term, this is expected to continue and the margins and working capital will remain affected by the shortage of semi-conductor chips.

Technological obsolescence risk
Electronics manufacturing companies are constantly exposed to obsolescence risk, which requires the company to keep up with the changes and advancements by constantly upgrading its products and technologies. But the company has seen and adapted to changes since inception and has been aware of the technological advancements, right from floppy disks manufacturing to RFID tags now. Syrma has recently forayed into manufacturing RFID tags, considering that the market for the same is expected to grow exponentially in future. The ability of the company to continuously enter new advanced product categories will be key to its future prospects.

Impact of the slowdown in the European and the U.S. market would only on this portfolio? Or it could be in any of the other segments of the exports of EMS?
In general, there’s a softening of the growth, I would say there is a reduction but there is a softening of the growth which we had projected, which we believe is for maybe 2 quarters or I don’t know, it’s just the geopolitical situation. But because of the diversified portfolio which we have, we have been compensated by other segments of the business, which is the domestic-led business. So, we would see the export business impacting on our overall plan for this year, in terms of our customer mix

Technicals on 14th May

Technicals when I entered

Disclosure –Invested from lower Levels . Do your own diligence before buying/selling

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

In case you have any questions/ queries, please feel free to reach me through Contact Form

Do spread the word among your peers, family members or anyone who can benefit from this blog and asked them to subscribe. But be selfish and take care of yourself first by subscribing before they do.

Enjoy the day and your life. Don’t forget, we are alone in this grand universe and may not get a chance to live again.