Syrma SGS Technology Ltd (SYRMA) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Syrma
Moderator: SGS Technology Limited Q2 FY '27 earnings call hosted by JM Financial Institutional Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Shalin Choksi. Thank you, and over to you, sir.
Shalin Choksi (JM Financial Institutional Securities Limited): Thank you, Saisha. Good morning, everybody. On behalf of JM Financial Institutional Securities, I welcome you all to the Q2 FY '27 earnings call of Syrma SGS. We have the senior management of the company joining us today morning. And I will now hand over to Mr. Nikhin Gupta, Head of Investor Relations to take the call forward. Thank you, and over to you, Nikhin.
Nikhin Gupta (Syrma SGS Technology Ltd): Yeah. Thank you, Shalin. A very good morning to all of you. On behalf of Syrma SGS family, we welcome you all to the Syrma SGS quarter two and half year fiscal 2027 earnings call. We have with us today Mr. JS Gujral, Managing Director, Mr. Jayesh Doshi, Whole-Time Director, Mr. Jagdeep Singh Brar, Chief Executive Officer, and Mr. Bijay Agrawal, Chief Financial Officer, Syrma SGS, to discuss the performance of the company during the second quarter and half year, fiscal year 2027, followed by a detailed question-and-answer session. Kindly note, during the call, certain statements that will be made are forward-looking which involve several risks, uncertainties, assumptions, and other factors that can cause results to differ materially from those in such forward-looking statements. All forward-looking statements made herein are based on the information presently available to the management and to the company. And company does not undertake to update any forward-looking statements that may be made during this call. In this regard, request you to kindly review the disclaimer statements in the earnings release and all other factors that can cause the difference. With this, I'll now hand over the call to Mr. JS Gujral, Managing Director, Syrma SGS. Thank you.
J.S. Gujral (Syrma SGS Technology Ltd): Good morning, everyone. A pleasure to speak to you for the Q2 FY '27 and H1 FY '27 earnings call. The quarter gone by has been very, very satisfying, and almost on all the parameters, whatever we had guided, we have either delivered better performance or almost the performance which we had committed. The most significant and satisfying aspect to the management is that a 71% growth has been achieved while maintaining fiscal hygiene. I think that's the most critical factor for us. We had a negative operating cash flow in Q1, and as committed, we sort of season from the prism of 1 year. This quarter we have turned positive, and we generated 120 crores of positive operating cash flow, which is approximately 30-odd percent of EBITDA, and that's what we had committed to everyone. Another very heartening factor is that in H1 of FY '27, we have almost surpassed all the figures of FY '25. In FY '25, we had a revenue of revenue from operations of 3,787 crores. This time it's about 3,578 crores. EBITDA was 324 crores for full FY '25. For this year, it's for this half year, it is 355. PAT was 184, this year it is 230. Exports were 854 in FY '25, in H1 they are 901. ODM, it was 453 crores in FY '25, it's 591. So, on all the qualitative aspects, we have surpassed what we did in FY '25 in H1. And this gives us the confidence to revise our guidance upward, that we would be able to deliver a 40% to 45% growth this year on an annualized basis, which would translate into around 7,000 crores of revenue. And we recommit or reaffirm that this is revenue growth will be achieved maintaining the fiscal discipline. Last quarter my working capital net working capital had gone up to about 71 days. It has come down back to 63 days. And with this, we are confident that next year that is FY '28, we should be able to
J.S. Gujral (Syrma SGS Technology Ltd): the $1 billion revenue mark ahead in time. The second aspect which is sort of which the management is seized of is the supply chain constraint which the industry is facing today. And whenever there are supply chain constraints, it has a cost push effect. We have pass-through mechanisms with all customers, but we don't get a value-add on the cost push, and that results in slight dilution in the margin profile. The absolute figures being maintained, but the margin profile does take a small hit because you get the same value addition on a higher base of the cost push. All our projects of diversification, backward integration, be it the PCB project, the camera module project, the magnetic project, they have all been sort of initiated the construction and commissioning. The major one which will have a significant impact in the long run on our, a positive impact rather, on our revenues and margin profile is the PCB project. It is on stream. And we expect as we have committed to power on the equipment by March, start the trial production. It takes about three to six months to get all the quality certifications, customer approvals, and all those things, so that by about September of '27, we should start the volume production. This would result in 28-29 a significant bump up in our margin profile because PCB project is a comparatively margin-accretive. Exports, as we have always been maintaining, are one of the cornerstones of our growth strategy. And exports is in the DMA DNA of Syrma SGS. We have been exporting for 35-plus years or 40-plus years. And exports have grown significantly. We expect this year that exports should cross the 1,700 crore mark. We had estimated at the start of year it will be about around 1,600, anything between 1,500 to 1,600, on a base of 1,200 crores in FY '26. If we achieve, and I'm very confident that we will achieve the 1,700-plus crore mark, next year it should give us around 2,000 crores in exports. We have beefed up our marketing presence in USA. And going forward, I think we will see a a slightly higher trajectory on a sustained basis in export growth. This this year they have been phenomenally at about 71% growth this year versus 41% last year versus 31% in FY '25. Another thing which the management had sort of shared with the Street that we would like to increase the ODM part of our revenue. While the percentage percentage is remaining stagnant because my non-ODM revenue is also showing a very strong increase, what gives us the satisfaction is that the ODM revenue in H1 FY '27 is 591 crores versus 273 crores of the previous year, H1 previous year, which is a 117% growth. Last year, we did at ODM revenue of 825 crores. So, in all probability and certainty, we'll be crossing the 1,000 to 1,100 crore mark in the ODM revenue. So, all these are projects which have a longer gestation, and I think they have started bearing fruit now. And going forward, we are very confident that we would be able to: a, grow at 30-35% for the next 3 to 5 years on a larger base, grow our export base. This half-year, my EBITDA margin is a tad lower than 10%. I expect the year to close at 10% to 10.5%. And going forward, that is 27-28, with my margin-accretive projects coming into stream, I expect that we should be anything between 10.5% to 11% or maybe marginally better than 11%. I think we'll have more clarity once the supply chain constraints are eased out. And we expect as per the industry and the chambers and the trade that the supply chain constraints will remain for the next 5 to 6 months and are expected to ease out only in April to June of '27. On an overall basis, I think
J.S. Gujral (Syrma SGS Technology Ltd): The company is on a solid footing and we have strived over the last three years to build a risk mitigated model such that we are not dependent on any one vertical, any one geography, any one customer or major customers which can sort of disturb the equilibrium of the growth. It's a truly sort of risk mitigated in terms of exports accounting for about 26%. My, none of my customers accounting for, one odd customer maybe about 12% to 14%, but all other customers will be less than 10% of my revenue. Automotive, industrial, consumers would continue to form the backbone. Healthcare, railways, which ever small ways, will show higher trajectory of growth in terms of percentages, but the base being small, they would still contribute to some 10% or 8% of our revenue. So, I think a very satisfying thing and full compliments to the team, which has strived to deliver these results with qualitative sort of, keeping the qualitative factors in to mind. With this, I hand over to Bijay to run you with all the details of financials and the finer points of the financials. Over to you, Bijay.
Bijay Agrawal (Syrma SGS Technology Ltd): Thank you, sir. Good morning, everyone, and thank you for joining us for this Q2 and H1 FY27 earnings call today. I'll briefly walk you through our financial performance for the quarter and the first half of the year, followed by our working capital position and capital allocation priorities. We have delivered another quarter of strong growth and robust numbers. The performance reflects the continued momentum across our diversified end markets, and our focus on scaling the business, while maintaining profitability and financial discipline. Let me start with the financial performance first. Our consolidated total revenue for Q2 FY27 is approximately 2,000 crores, registering a strong year-on-year growth of 73% and sequential growth of 25%. Our consolidated total revenue for H1 '27 is 3,603 crores, representing a growth of 71% year-on-year. Operating EBITDA for Q2 increased by 68% year-on-year to 193 crore rupees, and for H1 it is 355 crore, with a 68% growth on a Y-o-Y basis. Our EBITDA margin for H1 is 9.9% as compared to 10.1% last year, and despite a slight moderation in the operating EBITDA margin, our absolute profitability continue to increase substantially. PBT for the quarter is 165 crore and for H1 is 36, 306 crore, registering a strong 95% growth year-on-year basis for H1. Similar way, PAT for the quarter grew by 87% to 124 crore, and for H1 it grew by 98% to 230 crore. PBT margin improved from 7.4% to 8.1%, 8.5%, and while PAT margin increased from 5.5% to 6.4%, when compared on a year-on-year basis. This improvement in the bottom line reflects the growth in operating profitability and the benefit of operating leverage into my financials. When we see the revenue growth, it was broad-based across multiple, all the verticals. Automotive sector business recorded a revenue growth of 91% year-on-year basis, increasing its contribution to approximately 26% of operating revenue. We continue to see strong business momentum in this segment, supported by our customer relationships and participation across multiple automotive platforms. The consumer business contributed approximately 29% of our operating revenue for the quarter. Healthcare business grew by 61% year-on-year. This is actually a good margin business for us, maintaining a stable contribution to overall business. Industrial business recorded a strong growth of 86% year-on-year, and 31% sequentially. As highlighted in our previous call also, apart from automotive segment, we expect this segment should grow faster in the second half of this year. IT and railways also performed strongly, while revenue growing by 69% year-on-year, 22% sequentially. Its contribution increased to approximately 14% of our operating revenue during the quarter. Overall, the performance across our end markets demonstrates the benefit of our diversified business portfolio, and this diversification remains important as we continue to expand our presence across industries, and build capabilities in higher-value manufacturing.
Bijay Agrawal (Syrma SGS Technology Ltd): programs. Coming to export business, as highlighted by Mr. Gujral also, our export revenue increased by 91% year-on-year to approximately 514 crore for the quarter and 901 crore for H1, registering a growth of 80% year-on-year for H1. Our export performance reflects our increasing participants participation in the global supply chains and our availability to serve customers across broader range of customers and markets. Our ODM revenue for the quarter is 322 crore and for H1 it is 591 crore, registering a year-on-year growth of 117% for H1. Coming to customer concentration for H1, our top five customers contributed approximately 38% of our revenue, top 10 approximately 50%, and top 20 is contributing near about 66% of our revenue. Coming to order book visibility, as on September end, we are carrying an overall open order book plus visibility position of 7420 crores, of which Auto is approximately 30%, Consumer and Industrial segment each is contributing approximately 24.5 to 25%, Healthcare is 8%, and IT and Railways is contributi- contributing 12% near about. We remain confident that the volumes continue to scale, newer programs mature, and our operational efficiencies will continue to improve our overall profitability over the medium term. Moving to our working capital position and cash flows, our net working capital cycle improved to 63 days as of September '26, compared to 71 days in the previous quarter and 73 days as of September '25 on a year-on-year basis. This is an encouraging development, particularly in the context of ongoing supply chain constraints, and still we have been able to maintain a disciplined working capital investments. During H1 FY '27, our net operating cash flows was approximately 120 crores, resulting into OCF to EBITDA conversion of approximately 34% for the H1. Coming to balance sheet position, our balance sheet continued to remain healthy and support our growth plans. As of September '26, we continue to maintain a net cash position of 258 crores, supported by a strong, healthy treasury balance position of approximately 1,000 crores and a gross debt position of 746 crores. We continue to invest prudently in capacity expansions, technology, and manufacturing capabilities, strategic growth initiatives, while maintaining financial discipline. During the quarter, we incurred approximately 200 crores of capex, of which around 140 crores is towards the PCB project and balance is towards our brownfield capability enhancement across multiple units. Coming to our ROCE return, the returns for the for this period H1 is adjusted annualized ROCE is 21.4%, reflecting the improving working capital productivity. Our investments into the PCB project are progressing. We have already spent more than 200 crores for the project and expecting to spend another 200 crores in the balance of the year. We continue to target a commercial production start of this facility by April '27. We remain mindful of the importance of margin discipline, working capital management, cash conversion cycle, capital efficiency as the business grows. Our priority is to deliver consistent and profitable growth, supported by operational excellence and disciplined capital allocation and long-term customer partnerships. With that, I would like to thank you all the investors and stakeholders for their continued support. I'll now hand it over to the operator to open the floor for questions. Thank you.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sameer Sinha from Macquarie. Please go ahead.
Sameer Sinha (Macquarie): Yes, thank you very much, and congratulations. This is an excellent class few quarters. I have a couple of questions. First is, you know in terms of the the ODM revenue clearly that has been a is a growth area for you as well as margin-accretive. Can you give us some more details on, you know, are you expanding the ODM beyond
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