Cyient Ltd. share price target

operational efficiencies drove 160bp QoQ margin expansion to 14.6%, despite part wage hikes and a flat INR. Operational beat and higher-thanexpected other income led to PAT of INR1.1b (+27.4% QoQ), a beat of 6%. Laggards expected to pick up in 2HFY18: Transportation, Communications and Medical (37% of revenue) drove ~70% of sequential and YoY growth for CYL. On the other hand, the Industrial, Semiconductor and Utilities & Geospatial verticals continued to drag overall performance. Aerospace, which accounts for 35% of revenue, will be a critical determinant of the path going forward. This vertical has seen its organic growth slowing down to 5%...

We believe that this will not have any impact on business from UTC group. We also believe that the stake sale is likely to be a investment decision. We remain confident of Cyient achieving its FY18 guidance of a double digit growth for the services business, 20%+ growth in DLM. Our forecast factors FY17-19E revenue (US$)/EPS CAGR of 13%/13.9%. We maintain BUY and TP of Rs598 based on PER of 14x FY19E. Key Highlights and Investment Rationale UTC group has been and remains an strategic customer for Cyient...

ICICI Securities Ltd | Retail Equity Research US$ revenues declined 0.3% QoQ to $140.6 million led by the weak performance in DLM (Rangsons) business owing to weak quarter seasonality. Rangsons clocked in US$11.8 million in revenue, decline of 26.2% sequentially. On the other hand, core services business was in line with expectations and grew 3.1% to US$128.8 million. Growth in core services was led by transportation, semiconductor and communications business units. Cyient reiterated its guidance of double digit revenue...

India ER&D; opportunity to almost double by 2020 to USD 15 bn: Also, Indian vendors service only 17% of outsourced spends, Top clients momentum remains strong: Business from Top 5 clients (43% of revenue) registered 37% growth in FY17 (long standing relationships and high stickiness due to critical ..

We maintain BUY with a TP to Rs 570, implying 13x FY19 earnings. Cyient 1QFY18 numbers were muted led by steep fall in Design Led Manufacturing (DLM) business (~9% of revenue, -26% QoQ), however revival in core IT services (+3.3% QoQ) was encouraging. Management remains optimistic about Cyients growth prospects. It has reiterated its guidance for double-digit growth in the core business, 20% YoY growth in DLM and a 50bps margin expansion despite rupee appreciation.

Cyient's Q1FY18 revenue, unchanged QoQ in US$, was in line with our forecast. The services business continued to fire, +3.2% QoQ in US$, and the DLM business saw a QoQ decline. However, the EBIT margin and EPS decline was a miss. 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. We expect improvement from Q2FY18 and largely maintain our forecast FY17-19E...

Core Business Enthuses, But DLM Biz Plays Spoilsport Cyient's USD revenue declined by 0.3% QoQ to US$140.6mn in 1QFY18 vs. our estimate of 2.9% QoQ growth. However, core business showed a decent 3% QoQ growth, which comes on top of a 3.3% QoQ growth in 4QFY17. The core ENGG business grew by a solid 4% QoQ in USD terms, which comes on top of a 3.5% QoQ growth in 4QFY17. On the other hand, the DNO business clocked 1.7% QoQ growth in USD revenue (3% QoQ growth in 4QFY17). However, the DLM segment (Rangsons) has reported a disappointing 26.2% QoQ decline in USD revenue. On the positive side, on a YoY basis, DLM revenue grew 17.2%....

LTT trades at 14.3x FY19E, which is nearly in-line with midcap IT valuations (midcap IT PEG at 0.9x vs LTT at 1x). Initiate with NEUTRAL and TP of Rs 805, implying 15x FY19E. L&T; Tech (LTT) is a pure-play ER&D; company, at 37% of HCLTs ER&D; size and 20% of Altran (largest global ER&D; provider). LTT will benefit from increasing ER&D; outsourcing (currently only 22% penetration), based on (1) Diversified vertical mix, (2) Business de-risked from client concentration (lowest top-10 revenue share vs peers at 35%), (3) Large mining potential, with 45 clients from the global top-100 R&D; spenders, (4) Favourable offshore mix and high revenue productivity, as compared to Indian ER&D; peers (8/30% higher than Cyient/Tata Elxsi), (5) Margin levers such as utilisation (+400bps scope), fixed price and IP-revenue.

ICICI Securities Ltd | Retail Equity Research We attended Cyient's full house, analyst day in Hyderabad wherein the company reflected on concerns that impacted its FY17 performance and, at the same time, highlighted the strategy for the year ahead that could help achieve industry leading and sustainable earning growth. ( Re ) Ar tic ula ti n g S 3 s tr a te gy Cyient reiterated its aim to become a major tier-1 supplier in its select industry verticals in next 10 years. In order to meet this vision, the...