Cyient Ltd. share price target

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...

Cyient has maintained its FY18 outlook with a double digit growth for the services business and operating margin improvement of 50bps YoY. However, it now expects DLM to grow at ~16% YoY vs. 20% earlier. We factor Q3FY18 beat and increase our FY18 EPS by ~5%. We largely maintain our FY19 forecast. We introduce FY20 financials and forecast FY17-20E revenue (US$)/EPS CAGR of 12.6%/12.7%. We roll-over to FY20 and maintain BUY with a new street-high TP of Rs707 based on 15x vs. 14x earlier. Key Highlights and Investment Rationale...

Strong Core Business & Good 4Q Outlook Key Positives Cyient has reported a healthy revenue performance in 3QFY18. Its USD revenue from core services grew by 4.2% QoQ (4.4% in CC terms) owing to impressive performances in some key verticals including Aerospace & Defense (4.2% QoQ), Transportation (+8.8%), Industrial, Energy & Natural Resources (+4.2%) and Utilities & Geospatial (+8.7%). However, total revenue grew by a subdued 1.3% QoQ to US$152mn owing to a steep revenue decline in DLM business (-23.2% QoQ in USD terms) owing to pushing out of an order to 4Q. Within the core services business, ENGG clocked a strong 4.1% QoQ growth in revenue, while DNO grew by a healthy...

4.2% QoQ growth in Services was a significant beat to our estimate of -0.7% QoQ, especially given the aggravated seasonal weakness CYL faces. A 23% QoQ decline in Rangsons to USD12m was led byan order getting pushed to 4Q, weighing upon overall growth, which at 1.3% QoQ was still above estimates. EBITDA margin at 14.6% was steady, as strong growth provided support. The operational beat resulted in PAT of INR1,086m, a beat of 20% to our estimate. Growth was broad-based, with seven out of eight service units growing in double-digits YoY (11-44% YoY). With this momentum expected to continue into 4Q and no foreseeable threats to existing trajectory even in the next year, CYL should be able to clock 13% YoY growth in Services in both FY18 and FY19. This expectation gets further cemented by 17% YoY growth in the order book in 9MFY18. Although Rangsons saw a steep decline in 3Q, the guidance of 20% volume growth in FY18E was maintained, implying ~USD22m revenue in 4Q

We maintain BUY with a TP to Rs 587, implying 13x Sep-19 earnings. Cyient delivered robust 2QFY18 numbers, on both revenue and margins fronts. Revenue at USD 150.1mn was up 6.5% QoQ (+5.0%CC; our est. USD 146mn). This was led by strong execution in the Design Led Manufacturing (DLM) biz (~11% of revenue, +33% QoQ), and revival in core IT services (+4.0% QoQ). Margin expansion of 182bps to 14.6% (our est. 13.3%) despite a salary hike impact was encouraging.

Cyient has maintained its FY18 outlook with a double digit growth for the services business, 20% growth in DLM and operating margin improvement of 50bps YoY. It has also increased dividend payout to up to 40% vs. 30% earlier. We factor Q2FY18 beat and increase our FY18/19 EPS by ~3%. We now forecast FY17-19E revenue (US$)/EPS CAGR of 13.6%/15.4%. We maintain BUY with new TP...

ICICI Securities Ltd | Retail Equity Research US$ revenues grew 6.8% QoQ to $150.1 million and was above our 5.3% QoQ growth and $148 million estimate...

Cyient's revenue grew by 6.8% QoQ and crossed US$150mn in 2QFY18, exceeding our estimate of 6.2% QoQ growth led by healthy 4.3% QoQ and 33.7% QoQ growth in core and DLM business, respectively. Consistency in core business growth metrics is heartening, in our view especially with 4.3% QoQ growth following 3% QoQ/3.3% QoQ growth in 1QFY18/4QFY17, respectively. While ENGG business grew by a solid 4.3% QoQ in USD terms (following 4% QoQ growth in 1QFY18), DNO business clocked a strong 4.2% QoQ growth in 2QFY18. The DLM business saw a robust 33.7% QoQ USD revenue growth, which is a healthy recovery after the steep 26% QoQ dip in 1QFY18. On a YoY basis, DLM rose by a strong 17.4%....