Cyient Ltd. share price target

ICICI Securities Ltd | Retail Equity Research We attended Cyient's analyst day wherein the company articulated its initiatives in the direction of strategy driving the value transformation from a services to a solutions driven model. It also highlighted the focus...

We attended Cyient's (CYL) analyst meet, where the company elaborated on its aim to become a major tier-I supplier. It expects to achieve this goal by addressing the design-build-maintain value chain through its S3 (Services, Systems, Solutions)strategy. CYL has taken several steps to facilitate successful execution of this strategy, especially around building/acquiring various capabilities. While these capabilities now exist in isolation, the vision will be achieved on being able to successfully integrating these and providing solutions to customers

Cyient's Q4FY18 revenue growth of 8.3% QoQ, in US$, beat our forecast (+6.1% QoQ). This was driven by a 2% QoQ growth (+14.3% YoY) in the services business which we were forecasting to remain flattish QoQ. EBIT margin of 11.6%, -13bps...

We maintain BUY with a TP to Rs 755, implying 15x FY20 earnings. Cyient delivered strong revenue growth in 4QFY18 but disappointed on margin front. Revenue at USD 164.6mn was up 8.3% QoQ (higher than our est. of USD 163.3mn, +7.4%) led by strong growth in DLM (13% of rev, +81% QoQ). Core IT services (87% of rev, +2.0% QoQ) growth was below expectations.

Cyient posted a healthy 8.3% QoQ USD revenue growth in 4QFY18 led by DLM business (+81% QoQ), while core services business grew by 2% QoQ. From vertical perspective, Semiconductor (+7.5% QoQ) and Communications (+11%) that saw robust growth. With 1.8% QoQ decline in USD revenue, Aerospace remained subdued. Within the core services business, while DNO revenue surged by 5% QoQ in USD terms, ENGG revenue remained flattish. A positive is a healthy outlook for FY19E, with the Management guiding for double-digit revenue growth in core services business (in-line with FY18 growth), 20% growth in DLM (35% growth including B&F; acquisition) and flattish EBITDA margin, implying healthy double-digit growth in absolute EBITDA. Tax rate is...

ICICI Securities Ltd | Retail Equity Research US$ revenues grew 8.3% QoQ to $164.6 million, above our 7.6% QoQ growth and $163.5 million estimate...

A 50bp EBITDA margin contraction to 14.1%, attributed to higher margins in Rangsons (7% in 4Q v/s 1% in 3Q), cushioned the impact of the mix change (80% incremental revenue from DLM). Adjusted PAT at INR1.2b was up 16% YoY. Guidance of flat margins for the next year, despite investments toward development of new products and services, was encouraging. These efforts are aimed at opening new market opportunities and driving innovation to provide a competitive advantage.

Cyient is a leader in Engineering Services with presence in diverse sectors such as Aerospace, Communications, Railways, Semi conductors etc. Inspite of seasonally weak quarter, company reported 4.4% constant currency growth in services (~90% of revenue) in Q3FY17. Management guided for double digit growth in services and DLM segment backed by strong pipeline and order backlog. We recommend hold rating with TP of INR598 (15x FY19E EPS). Strong growth in services revenue Cyient reported consolidated revenue growth of 7.6% YoY and 2% QoQ to INR 9833mn (US$ 152mn) in Q3FY18. Core services business continued with its strong performance and reported...

We maintain BUY with a TP to Rs 670, implying 14x Dec-19 earnings. Cyient delivered good revenue growth and margin performance in 3QFY18. Revenue at USD 152.0mn was up 1.3% QoQ (in-line with our est. of USD 152.5mn). This was led by strong growth in core IT services (92% of revenue, +4.2% QoQ, +4.4% CC) offset by drag in Design Led Manufacturing (DLM) business (8.0% of revenue, -23.3% QoQ). Margin remained flat at 14.5% (in-line with our est. of 14.4%) despite a seasonally weak quarter, led by higher utilization (+270bps) and off-shoring (+8.2% QoQ).

ICICI Securities Ltd | Retail Equity Research US$ revenues grew 1.3% QoQ to $152 million, below our 2.9% QoQ growth and $154.4 million estimate...