Share price of Sirma SGS Technology (Sirma) jumped 8.3 per cent to hit a new high of Rs 535 on the BSE in Friday’s trade on account of expiry of pre-listing 1-year lock-in period.
The stock has become highly liquid with the company’s lock-in period ending today. According to a report by Nuwama Institutional Equities, a total of 4.22 crore shares (42.2 million) of the company got locked up during the last one year, which is 24 per cent of its total outstanding shares.
The stock, listed a year ago on August 26, 2022, has gained nearly 2.5 times (143 per cent) from its issue price of Rs 220. On its first day, the stock closed with a gain of 41 per cent.
In a recent report, analysts at Nuwama initiated coverage on Sirma with ‘Buy’ rating and target price of Rs 760, valuing it at 35 times 1-year forward PE.
Sirma SGS is an established domestic player in the non-mobile Electronic Manufacturing Services (EMS) sector, and its large diversified business model should keep it electrified, enabling it to ride the EMS megatrend, he said in the note.
India’s policy through PLI and Make in India and cost economics can increase domestic electronics production from $100 billion to $300 billion in the next five years, it has called it an unmistakable megatrend – a super opportunity for the Indian EMS sector. making a circle.
The report states that Sirma has built scale, operational excellence, reliability and complexity over time in PCBA, box-build and ODM. Its model, which is more open to mid-volume-mid-price, is more suitable for achieving growth in the EMS super cycle.
It added that Sirma’s business model is well-diversified with revenues spread across sectors such as auto, consumer, healthcare, industrial, IT and railways, which is growing rapidly. This diversification provides a hedge – if there is a downturn in specific sectors.
“EMS stocks have a current PE of 30-40 times, but they are at a very early stage of a long, high-growth cycle. So, even if one assumes that valuations have diluted the story, the next five- This has the potential to deliver extremely healthy stock returns, growing earnings over seven years”, the note said.
Besides Sirma, the brokerage has also initiated coverage on Kayans Tech with a buy rating and target price of Rs 2,340.