Cyient Ltd. share price target

ICICI Securities Ltd | Retail Equity Research US$ revenues grew 5% QoQ to $168.9 million, in-line with our $169.2 million and 5.2% QoQ growth estimate. Revenues in constant currency grew 6.5% sequentially Revenues in rupees grew 9.9% QoQ to | 1,187 crore EBITDA margins expanded by 150 bps QoQ to 13.7% and were way above our 70 bps expansion and 12.9% estimate. Margin expansion was mainly due to rupee depreciation (+80 bps), utilization &...

Maintain BUY with a TP to Rs 850, implying 16x Sep-20 earnings. Cyient delivered strong performance in 2QFY19, both on the revenue and margin front. Revenue at USD 168.9mn was up 5.0% QoQ and 6.5% CC (higher than our est. of USD 166.6mn) led by strong DLM (14% of rev, +27% QoQ). Services (86% of rev, +3.5% QoQ CC) growth was in-line with expectations. Communication (+4.5% CQGR) & Transportation (+6.0% CQGR) are fueling growth while the largest vertical, Aerospace & Defence (+1.7%) growth will pick-up from 4QFY19E.

17 October 2018 Revenue growth of 5.1 % QoQ was better than our estimate, primarily due to the beat in the Design-Led Manufacturing (DLM) business. In Services, revenue growth of 3.5 % QoQ CC was in line with our estimate of 3.8 %. EBITDA margin expanded 150bp QoQ to 13.7 % (50bp beat), as the impact of wage hike was more than offset by currency tailwinds and efficiencies. PAT grew 54 % QoQ to INR1.27b (largely in-line). In Services, CYL clocked 10.2 % YoY CC growth in 2Q. However, this included revenue from AnSem, excluding which, growth would have been lower by 2pp, marking deceleration from 11.7 % YoY CC growth in FY18. Achievement of double-digit growth in FY19 is contingent on continued momentum in 2H, but would still reflect a slowdown on an organic basis. Earlier in the year, CYL alluded to 100bp investments in the New Business Accelerator (NBA) program, which would keep margins flat in FY19.

We maintain BUY with a TP to Rs 815, implying 16x FY20 earnings. Cyient delivered weak performance in 1QFY19, both on the revenue and margin front. Revenue at USD 160.8mn was down 2.3% QoQ and 1.3% CC (lower than our est. of USD 164.8mn) led by seasonally weak DLM (11% of rev, -17.8% QoQ). Services (89% of rev, +1.1% QoQ CC) growth was below expectations however recovery in Aerospace and Defence (+2.4% QoQ) was encouraging. Margin was down 184bps QoQ to 12.2% (below our est. of 14.4%), led by margin contraction in Services (-200bps QoQ) and lower utilisation (-170bps QoQ).

Cyient has reported a disappointing performance in 1QFY19, with its USD revenue declining by 2.3% QoQ (-1.4% in CC terms) to US$160.8mn (3.1% below our estimate). Core services revenue rose by 1.1% QoQ in CC terms (+0.1% QoQ in USD terms), while DLM business USD revenue declined by 17.8% QoQ owing to seasonality. However, on YoY basis, DLM surged by a healthy 52.6%. From vertical perspective (core services), Transportation (+4% QoQ in USD terms) and Semiconductor (+40.2% QoQ) saw robust growth, while Medical & Healthcare (-4.1% QoQ), Utilities & Geospatial (-12.1% QoQ) and Communications (-3.3% QoQ) dragged revenue. Segment-wise, ENGG saw a healthy 4% QoQ growth in USD revenue, while DNO revenue...

Cyient's Q1FY19 result missed our forecast. While 2.3% QoQ decline US$ revenue was slightly higher than our forecast of a 1.2% decline, the QoQ decline in EBIT margin and EPS was a big miss. However, Cyient has allayed concerns on the same. It is confident of the pick-up in revenue growth and thus improvement in profitability from Q2FY19...

ICICI Securities Ltd | Retail Equity Research US$ revenues declined 2.3% QoQ to $160.8 million and were below our $162.8 million and 1.1% QoQ decline estimate...

12 July 2018 Revenue fell 2.3% QoQ, as against our estimate of a 1.8% QoQ decline. On a YoY basis, revenue growth stood at 14%. Excluding the acquisition, revenue declined by 1% QoQ soft for a seasonally strong quarter. DLM revenue at USD18m was higher than our estimate of USD16m, and drove in-line consolidated revenue. EBITDA margin stood at 12.2% (a contraction of 190bp QoQ), lower than our estimate of 13.1% (-100bp QoQ). Margins for the quarter were driven by lower offshore mix and utilization (120bp), wage hikes (70bp), favorable currency movement (60bp), one-off expenses, including M&A; (-40bp) and SG&A; (30bp). PAT of INR825m (-32% QoQ) was below our estimate of INR1,096m (-7% QoQ). The miss was led by the margin miss, lower other income and a higher tax rate. Total order intake declined from USD206m in 4QFY18 to USD170m in 1QFY19, mainly due to a reduction in order intake in the services business.

Cyient delivered better revenue growth in Q4FY18. Revenue grew by 12.8% YoY, largely on account of strong growth in Design Led Manufacturing (DLM) business. EBITDA margins was at 14.1% (down 50bps QoQ), impacted by lower utilisation (down 190bps). Adj. PAT grew by 16% YoY on the back of better margins and revenue growth. Management remains optimistic about Cyient's growth prospects. They guided double-digit growth in the core business, ~35% YoY growth in Design Led Manufacturing (DLM) but guided flat margins for FY19E. Revenue and PAT to grow at 14% and 17% CAGR respectively over FY18-20E led by double digit growth in core IT services and higher participation from DLM business....

Cyient reiterated its S3 strategy and its transformation into an end-to-end Tier-1 solutions provider. While Cyient 3.0 involves design, build, operate and maintain, Cyient 4.0 would focus on transforming the company into an end-to-end solutions provider by leveraging IPs (developed in-house and through partnership). We remain confident of the growth momentum, factor acquisition of Ansem and increase FY19/20E revenue by 1%/3% and EPS by 2%/4%. We now our forecast of FY18-20E revenue (US$)/EPS CAGR of 15.5%/13.9%. We maintain BUY with new TP of Rs889 based on 18x FY20E (vs. 16x earlier)....