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Syrma SGS Technology Ltd
A Business Analysis
About Company
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.
Product Portfolio
Business Overview
The comppany is technology-focussed engineering and design company engaged in turnkey electronics manufacturing services (“EMS”), specialising in precision manufacturing for diverse end-use industries, including industrial appliances, automotive, healthcare, consumer products and IT industries. According to the F&S Report, among the large bouquet of EMS players in India, the company is one of the fastest growing Indian-headquartered ESDM companies. (Source: F&S Report) Company has a track record of technical innovation which involves working with the engineering teams of their marquee customers, and over the years, company have evolved to provide integrated services and solutions to OEMs, from the initial product concept stage to volume production through concept co-creation and product realization. Company is manufacturing infrastructure enables them to undertake a high mix of products with flexible production volume requirements. The company is leaders in high mix low volume product management and are present in most industrial verticals. (Source: F&S Report) Further, we are one of the leading PCBA manufacturers in India, supplying to various OEMs and assemblers in the market.
The company leverage their various strengths such as global sourcing capabilities and long-standing relationship with their vendors to consolidate and bring down the cost of raw materials and components, and explore alternative components, vendors, materials and processes to reduce product cost and bring products faster to market. Company's concept co-creation initiative enables them to design products for their customers from the ideation / concept phase that they initiate and give them the preliminary prototypes for their testing and trials. This may also involve collaboration with the engineering team of their customers. Once the design and quality are approved, company help them to seamlessly transition to volume manufacturing at their high-speed fully integrated manufacturing facilities. The company have continuously diversified their product portfolio to keep pace with developments in technology. In addition, their continued focus on technology innovation and their design infrastructure have also enabled to undertake services for their customers over time.
Company's endeavour to identify and understand the key market trends and address their customers’ evolving needs proactively and on a timely basis. For instance, in response to the requirements of the IT industry, manufactured high precision coils for hard disk drives starting in 2005 and USB drives in 2008. Similarly, to address the requirements of home entertainment industry, company's manufactured set top boxes from 2008. In respect of the telecom industry, pursuant to the advent of 3G technology in India, forayed into manufacturing of GSM antennae from 2008 to 2012. Subsequently, pursuant to advancements to 4G technology, company's proceeded to manufacture 4G and LTE antennae in 2016. Company are currently undertaking manufacture of modules for 5G technology infrastructure. Company has began to cater to the automotive end-use industry with the manufacture of hall sensor PCBAs in 2007. Since then, company have progressed to manufacturing of vehicle tracking systems and toll management systems in 2009, beacons for vehicles in 2012 and 4W lighting system boards in 2021. Considering the advancement of electric vehicles, the company have also commenced manufacturing of controllers of the EV battery management systems in 2020. Similarly, recognising the requirements of the consumer products industries, commenced manufacturing of automatic dimmers for homes in 2010, and since then, have proceeded to manufacturing of induction cooktop components in 2016, boiler management PCBA units in 2013, energy-efficient electronic inverters and home appliance control PCBAs in 2014 and controller units for air conditioners in 2015. In connection with the healthcare industry, company designed and manufactured direct digital dental X-ray FGPA controllers in 2007. Since then, we have progressed to manufacturing of PCBAs for X-ray machines in 2014, PCBAs for smart canes for visually challenged people in 2015, augmented reality equipment for ophthalmological applications in 2018 and PCBAs for baby case CPAP ventilators in 2020.
The company have a wide product portfolio with applications across diverse end-use industries Company's products are primarily focussed toward ODMs and OEMs serving end-use industries including the automotive, healthcare, IT, industrial appliances, energy management, water purification, power supply and consumer products industries. In Fiscals 2019, 2020 and 2021 and the three months ended June 30, 2021, based on the Proforma Condensed Combined Financial Information, their proforma revenue from operations attributable to our customers in each of the relevant end-use industries have been set out below:
Company's Manufacturing Facility
The company operates through eleven manufacturing facilities in north India (i.e. Himachal Pradesh, Haryana, and Uttar Pradesh) and south India (i.e. Tamil Nadu and 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 allow the company to avail tax and other benefits.
Company's R&D Capabilities
The evolution of their product portfolio and service offerings have been driven by our R&D capabilities. The company have three dedicated R&D facilities, two of which are located in India at Chennai, Tamil Nadu and Gurgaon, Haryana respectively, and one is located in Stuttgart, Germany. Company's R&D efforts are focused on (i) development of new products and improvement of the quality of their existing products; and (ii) driving the design and engineering capabilities and original design manufacturing capabilities of their Company. The company are also supported by a team specifically earmarked for R&D comprising of 77 full time employees, as on September 30, 2021. Company's R&D capabilities enable them to explore technological innovations and developments which may give us a competitive edge in future. During the Fiscals 2019, 2020, and 2021 and the three months ended June 30, 2021, ₹ 2,559.60 million, ₹ 2,804.30 million, ₹ 1,931.30 million and ₹ 469.70 million, which accounted for 71.20%, 69.99%, 43.90%, and 35.27%, respectively of their revenue from operations, was attributable to their original design manufacturing services. Based on their Proforma Condensed Combined Financial Information, during the Fiscals 2019, 2020, and 2021 and the three months ended June 30, 2021, ₹ 3,109.00 million, ₹ 3,675.00 million, ₹ 2,598.70 million and ₹ 625.20 million, which accounted for 39.12%, 42.45%, 29.28%, and 25.49%, respectively of their proforma revenue from operations, was attributable to their original design manufacturing services.
Company's strong focus on R&D has helped them increase their wallet share by helping them widen their product offerings to the same customer, and cross selling these products to other customers. Company's R&D team also aims to provide solutions to improve of their existing manufacturing processes, including by adoption of advanced manufacturing technology, improve manufacturing efficiency on their existing products and reduce manufacturing costs. This helps them produce high quality products consistently and also enables them to maintain a cost advantage over their competitors.
Company's Competitive Strength
One of the leading design and electronic manufacturing services companies in terms of revenue in Fiscal 2021, driven by our focus on quality and customer relationships :
The company is a technology-focussed engineering and design company engaged in turnkey electronics manufacturing services (“EMS”), specialising in precision manufacturing for diverse end-use industries, including industrial appliances, automotive, healthcare, consumer products and IT industries. According to the F&S Report, among the large bouquet of EMS players in India, they are one of the fastest growing Indian-headquartered ESDM companies. (Source: F&S Report) Further, company are leaders in high mix low volume product management and are present in most industrial verticals. (Source: F&S Report) Company are one of the leading PCBA manufacturers in India, supplying to various OEMs and assemblers in the market. (Source: F&S Report) Our Company is also amongst the top key global manufacturers of custom RFID tags.
Consistent track record of financial performance
The company also have also set out below the same key performance indicators, based on their Proforma Condensed Combined Financial Information (which assumes the acquisition of SGS Tekniks and Perfect ID as on April 1, 2018):
Established relationships with marquee customers across various countries
Company's product portfolio has helped them forge strong relationships with their major clients. The company have established and will continue to focus on strengthening long-standing relationships with well-known customers across the end-use industries that we cater to. The varied applications of their products have helped them build a wide customer base across many end-use industries. It has also helped build on existing relationships by enabling them to provide multiple product-oriented solutions for the varying requirements of their existing customers. Several global brands are their customers both in India and overseas. Certain of their marquee customers across the end-use industries that we cater to, include TVS Motor Company Limited, A. O. Smith India Water Products Pvt. Ltd., Robert Bosch Engineering and Business Solution Pvt Ltd, Eureka Forbes Ltd Limited, CyanConnode Limited, Atomberg Technologies Private Limited and Total Power Europe B.V. Our wide customer base across various sectors reduces our dependence on any one end-use industry and provides a natural hedge against market instability in a particular end-use industry.
The company have a history of strong customer retention. During the three months ended June 30, 2021, we catered to over 200 customers of which 16 customers have been associated with them for over a period of 10 years. Further, in Fiscals 2019, 2020 and 2021, and in the three months ended June 30, 2021, 75.87%, 75.31%, 64.76% and 62.29% of them revenue from operations, respectively, was contributed by their customers who have been associated with them for over three years. Further, we acquired 27, 48 and 42 new customers in Fiscal 2019, 2020 and 2021 respectively. In addition, 66 of their 200 customers have been their customer for over three years, as on June 30, 2021. We have also increased the product portfolio provided to their clients over periods of time.
State-of-the-art manufacturing capabilities supported by a global supplier network, with a focus on vertical integration
The company currently operate through eleven manufacturing facilities spread across five states namely Tamil Nadu, Karnataka, Himachal Pradesh, Haryana and Uttar Pradesh, that are supported by 697 permanent employees and 3,361 persons employed as contract labour / temporary employees and retainership employees (as on June 30, 2021). Their presence in these states enables them to efficiently cater to the requirements of our customers in north and south India. Company's manufacturing facilities in Tamil Nadu are located in a special economic zone and their manufacturing facility in Haryana has been set up under the Electronic Hardware Technology Park scheme, which allow them to avail certain tax and other benefits in respect of the products manufactured out of these facilities. In addition, their manufacturing facilities are strategically located in Tamil Nadu, Karnataka and Haryana, which allow them to cater to them export requirements (in light of the proximity of these facilities to the respective city airports and Chennai port). The common manufacturing capabilities across their facilities gives them the flexibility to seamlessly migrate production between different facilities in case of emergencies.
The company is also migrating their ERP platforms to the Hana S4 platform which will result in common centralised databases for components, vendors, quality and supply chain, which will lead to productivity improvements and efficient working capital management. The company is a eligible for incentives under the ‘Production Linked Incentive Scheme (PLI) for Telecom and Networking Products’ notified by the Ministry of Communications, Department of Telecommunications on June 3, 2021. These product linked incentives make them eligible to manufacture products in categories like access & customer premise equipment (CPE), IOT access devices and other wireless and enterprise equipment. In addition, company have been provisionally selected as beneficiaries for the incentives being granted under the ‘PLI for White Goods (Air Conditioners & LED Lights)’ notified by the Ministry of Commerce & Industry on June 4, 2021 notified by the Ministry of Electronics and Information Technology on April 1, 2020.
Company's Stretegies
Solidify and strengthen our core competitiveness of technology innovation:
The company have intend to continue to invest in technology infrastructure to enable further technical innovation, improve their operational efficiencies, increase customer satisfaction and improve their sales and profitability. The company intend to further develop their technological infrastructure and technical know-how, to improve on their existing design and engineering service and original design manufacturing capabilities.
Pursue inorganic growth through strategic acquisitions
The company have continuously sought to diversify their product portfolio which could cater to customers across various end-use industries and geographies. Accordingly, while we seek to continue to strengthen their existing product portfolio, the company also intend to further diversify into products with prospects for increased growth and profitability by leveraging our R&D capabilities. The company also plan to continue to increase offerings in their current business segments as well as diversify into new products by tapping into segments which in the view of their management have attractive growth prospects.
Expand our customer base and geographic reach
The company have, in the past, continuously focused on increasing their customer base by enhancing their reach with dedicated resources, diversified product and service offerings and wide geographical presence. The company have increased their customer base in the past through new products and segments, strategic acquisitions and through expanded services offerings which include prototyping services, tester development, and repair and rework services. The number of OEMs and ODMs the company catered to have grown to 275 during Fiscal 2021 from 207 during Fiscal 2019, on a proforma basis. The company are a focussed supplier to OEMs and ODMs and believe that there are several avenues of growth within this segment. Historically, the company have established profitable relationships with OEMs and ODMs, and are confident that the company can continue to do so. The company is working towards tying up with the top three market leaders in each end-use industry that they intend to cater to, and have their largest wallet share. The company intend to continue focusing on increasing their customer base by marketing our existing products and services to new customers across.
Company's Product Portfolio
PCBA
RFID
Electromagnetic and electromechanical part
Other products
Manufacturing Facilities
Company's Management
Jasbir Singh Gujral
Jasbir Singh Gujral is the Managing Director of our Company. He holds a bachelor of commerce (honours) from the University of Delhi. He is a fellow member of the Institute of Chartered Accountants of India. He has over 39 years of experience in the electronics manufacturing sector.
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Sreeram Srinivasan is the chief executive officer of our Company. He oversees operations and business strategy. He holds a B.Tech in metallurgical engineering from IIT, Madras and an MS and PhD from North Carolina State University. He has 20+ years of experience in business operations. He has previously served as VP Operations of Rane Engine Valves, President & ED of Shanti Gears, MD of Saint Gobain Sekurit India and CEO of MTAR Technologies.
Shareholding Pattern
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Financial Performance
Profit And Loss
Balance Sheet
Cash Flow Statement
Margin Profile
Efficiency Profile
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.
Source - Company's RHP, website and investor presentation and StocX.in. Disc - Not an recommendation
I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.
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