Syrma SGS Technology Ltd Q2 FY27 Earnings Call: Guidance Raised To 45-50% Growth, Eyes $1 Billion Revenue In FY28

Hyper-Growth Quarter with Operating Leverage Kicking In

• Q2 FY 2026-2027 revenue ~Rs.2,000 crore — up 73% YoY and 25% QoQ; H1 FY 2026-2027 revenue at Rs.3,603 crore, up 71% YoY.
• H1 FY 2026-2027 PAT at Rs.230 crore (+98% YoY) — PBT of Rs.306 crore (+95% YoY); PAT margin improved to 6.4% from 5.5% YoY, attributed to operating leverage; Q2 PAT at Rs.124 crore (+87% YoY).
• H1 EBITDA margin at 9.9% vs 10.1% in H1 FY 2025-2026 — slight margin moderation, though absolute profitability continues to rise.
• Operating cash flow turned positive at ~Rs.120 crore in Q2 FY 2026-2027 (~30% of EBITDA) after negative OCF in Q1 FY 2026-2027; H1 OCF-to-EBITDA conversion ~34%.
• Net working capital improved to 63 days as of September 2026, from 71 days in Q1 FY 2026-2027 and 73 days in September 2025; adjusted annualized ROC at 21.4% for H1 FY 2026-2027.
• Balance sheet as of September 2026 — net cash of Rs.258 crore, treasury balance ~Rs.1,000 crore, gross debt Rs.746 crore.
• Q2 capex ~Rs.200 crore — ~Rs.140 crore towards the PCB project, balance towards brownfield capability enhancement; more than Rs.200 crore already spent on PCB, with another Rs.200 crore targeted in the balance of FY 2026-2027.

Guidance Raised Twice; $1 Billion in Sight for FY 2027-2028

• FY 2026-2027 revenue growth guidance raised to 45-50% (from 35% earlier; also framed as 40-45% in the call), implying revenue touching/crossing Rs.7,000 crore; MD J.S. Gujral noted the landing point (Rs.7,000-7,500 crore) depends on supply-chain readiness.
• Management is confident of crossing $1 billion revenue in FY 2027-2028 — and of 30-35% annual growth over the next 3 to 5 years (FY 2027-2028 onward) on a larger base.
• FY 2026-2027 EBITDA margin guided at 10-10.5%, rising to 10.5-11% (possibly marginally above 11%) in FY 2027-2028 as margin-accretive projects come on stream.
• Implied H2 FY 2026-2027 slowdown (vs 71% H1 growth against 45% full-year guidance) attributed by management to supply-chain caution, not demand weakness; demand side described as "very bullish." Analyst Aditya Bhartia (Investec) noted Q2 annualizes to ~Rs.8,000 crore vs ~Rs.7,600 crore FY 2026-2027 guidance.
• ~$250 million framework agreement — CEO Jaydeep Singh Barar said NPIs and early production runs are complete with a ramp-up plan agreed; revenues begin FY 2027-2028 with full impact in FY 2027-2028 and beyond; CFO Vijay Agarwal sized it at a minimum Rs.500-600 crore annualized to start with (FY 2027-2028 onwards), spanning industrial, power management, power distribution and data center end-markets.
• Customer onboarding pipeline — ~32 customers onboarded in FY 2025-2026 and ~18 in H1 FY 2026-2027; the FY 2025-2026 cohort is expected to give serious results in FY 2027-2028, with current onboardings reaching volume production in FY 2028-2029.

Rs.7,420 Cr Order Book; Exports as a Structural Growth Cornerstone

• Order book plus visibility at Rs.7,420 crore as of September 2026-end — Automotive ~30%, Consumer & Industrial ~24.5-25%, Healthcare 8%, IT & railways ~12%; ~Rs.1,200 crore pertains to periods beyond 12 months, with select auto customers placing longer-duration orders due to supply constraints.
• Order growth (~25-30%) need not match revenue growth — MD Gujral clarified reported orders capture only firm purchase orders, not framework contracts, annual customer guidance or automotive quarterly rolling forecasts.
• Exports grew 31% in FY 2024-2025, 41% in FY 2025-2026 and ~70-80% in H1 FY 2026-2027 — Q2 FY 2026-2027 exports at Rs.514 crore (+91% YoY); FY 2026-2027 exports expected to cross Rs.1,700 crore (vs Rs.1,200 crore FY 2025-2026 base) and ~Rs.2,000 crore in FY 2027-2028.
• Export mix — bulk from industrial, medtech and automotive (plus some RFID/consumer); new-customer dialogue concentrated in medtech, industrial and automotive, in that order; exports ~26% of revenue in FY 2026-2027.
• Q2 FY 2026-2027 vertical growth (YoY) — Automotive +91% (~26% of operating revenue), Industrial +86%, IT & railways +69% (~14% of revenue), Healthcare +61%; Consumer ~29% of operating revenue; management expects Industrial (apart from Automotive) to grow faster in H2 FY 2026-2027.
• Customer concentration in H1 FY 2026-2027 — top 5 customers ~38% of revenue, top 10 ~50%, top 20 ~66%; largest customer 12-14% of revenue with all others below 10%.
• ODM revenue at Rs.591 crore in H1 FY 2026-2027 (+117% YoY) — FY 2026-2027 ODM expected to cross Rs.1,000-1,100 crore (vs Rs.825 crore in FY 2025-2026); focus verticals are healthcare, defense, power electronics, RFID and magnetics, with a significant bump expected over the next 2-3 years.

Rs.800-900 Cr PCB Bet Anchors the FY 2028-2029 Margin Story

• PCB capex of Rs.400-450 crore by end of FY 2026-2027 and a further ~Rs.400-450 crore by end of FY 2027-2028, taking total investment to Rs.800-900 crore by March 2028; power-on expected March 2027 (Q4 FY 2026-2027), volume production by ~September 2027 (Q2 FY 2027-2028).
• PCB revenue guided at ~Rs.200-300 crore in FY 2027-2028 (CFO cited Rs.200-250 crore; MD Rs.250-300 crore) for ~6-7 months of commercial production; FY 2028-2029 indicated at Rs.700-800 crore by the MD, with the CFO framing Rs.900-1,000 crore at 70-80% utilization and Rs.1,200-1,350 crore at full ramp-up (1.5x asset turn assumption).
• PCB steady-state EBITDA margin of 15-18% at full ramp-up (FY 2028-2029), excluding PLI/incentives; MD Gujral said the company is "very confident" of ~15% margin without PLI, with 17-20% "should be available" with PLI, depending on market dynamics and whether PLI is shared with customers.
• Return ratios "should be north of 30-35% plus" per CFO Agarwal, assuming all capex incentives are received (period unspecified); analyst Keshav Lahoti flagged that factored margins may be on the higher side given industry dynamics; management does not expect a PCB PAT loss in FY 2027-2028 "as of now," though EBITDA margins "can be little lower" in the initial year at ~40% utilization.
• Capex subsidy recovery — filing the capital subsidy application by March 2028 (FY 2027-2028) "at the outside" should enable recovery of the Rs.200 crore capital subsidy, mainly from the state government; PLI income for FY 2027-2028 revenues is eligible only after March 2028, with claims filed in July-August 2028 and a further 3-6 months for recovery.
• CCL backward integration deferred — MD Gujral said the company "has plans to enter into the copper clad laminate" but only once the PCB plant stabilizes (expected mid-FY 2027-2028); if execution planning starts in Q3 FY 2027-2028, the CCL plant is expected ready around December 2028 with series production in FY 2028-2029; HDI/flex PCBs expected in FY 2028-2029, not before.
• Camera modules and magnetics are margin, not scale, plays — automotive camera modules (capex Rs.25-30 crore to start with, initial revenue Rs.50-100 crore, period unspecified) expected to move margins only 1-2% given the automotive industry's ~25% gross material margin; magnetics (US$10-20 million revenue) highly margin-accretive but top-line immaterial; wire harness targeted to scale to Rs.400-500 crore over the next 5 years.

Component Shortages Are the Key FY 2026-2027 Swing Factor

• Component lead times stretched to 36-42 weeks — passives (capacitors, resistors) from 4 weeks to 16 weeks, active components (controllers) to 36 weeks or more; controllers and similar critical components are ~40% of the electronic BOM (~28% of total BOM, rough estimate).
• Management, citing industry chambers and trade, expects constraints to persist ~5-6 months and ease only in April-June 2027 (Q1 FY 2027-2028); constraints are cost-push in nature — pass-through mechanisms exist with all customers but no value-add is earned on the cost push, diluting margin profile though absolute value is maintained.
• Rs.50-80 crore of Q2 FY 2026-2027 revenue attributable to raw-material cost push of 3-5% (reported ~3%, possibly mix-driven), fully passed through; remainder from volume growth.
• Inventory rose from Rs.1,000 crore (March 2026) to Rs.1,570 crore (September 2026) — a 50% increase against ~70% H1 revenue growth, with inventory days flat at 71; management will maintain strategic inventories of critical long-lead components until the supply situation eases, possibly beyond FY 2026-2027.
• Working capital focus of 60-65 days — management aspires to below 60 days but does not expect that in H2 FY 2026-2027; MD Gujral said he would rather carry higher inventory than miss customer requirements.
• Forex structure — export contracts are fixed-price; exports (~Rs.900 crore in H1 FY 2026-2027) provide a natural hedge for import-related forex exposure, and almost all large domestic businesses have a forex pass-through mechanism per CFO Agarwal.

New Verticals Ramp from FY 2027-2028; ARC System as a "Marathon"

• FY 2027-2028 new-vertical revenue guidance — ~Rs.100-150 crore from the Kaga Electronics JV, Rs.150-200 crore from the Telemaster (Elimaster) JV, and Rs.200-300 crore from the PCB vertical; over a 5-year period, each strategic partnership can scale to Rs.500-800 crore.
• Elimaster JV plant commissioned early September 2026 — ISO, IRS and possibly RDSO certifications expected in FY 2026-2027, so no sizable revenue in FY 2026-2027; Kaga JV (agreement signed ~2 months prior, Q2 FY 2026-2027) awaits regulatory and quality approvals including IATF 16949, requiring 2-3 months of production history.
• Elcom contributed ~Rs.135 crore in H1 FY 2026-2027 — FY 2026-2027 revenue expected at Rs.300-350 crore, currently growing 20-25%; Syrma Jori Medtech (SJML) contributed ~Rs.140 crore in H1, targeting ~Rs.300 crore for FY 2026-2027 (vs Rs.210-220 crore in FY 2025-2026), with 45-50% growth expected; a new medical-grade plastics facility at Jodhpur has been commissioned.
• ARC system live in 3-4 plants — implementation began in FY 2026-2027 with a 5-6% OEE improvement on SMT lines so far and 6-10% expected across all plants once mature (period unspecified); across ~40 SMT lines (~20,000 line-hours/month), a 5% OEE gain frees ~1,000 hours, equivalent to ~2 lines of capacity; management positions Syrma as the first Indian company to deploy this ARC system.
• Three-layer technology deployment per CEO Barar — (1) core operations via ARC and at-scale supervisor capability building; (2) scaling for sophisticated customers via material ordering, track-and-trace and EDI integration; (3) AI tools — currently limited but being expanded for RFQ processing and supply-chain complexity, with "very good success" already seen.
• ISM 2 entry only with a credible partner — discussions ongoing with nothing concrete; management hopes to have something concrete in the next 6 months (from the October 2026 call).
• MD Gujral flagged unstable market and geopolitical conditions as the "new normal" post-COVID — management does not work with a quarter-on-quarter lens, plans on at least an annual horizon, and is gearing up to serve a $10 billion global customer, a different ethos than serving a $500 million Indian company.