Cyient Ltd. share price target

lower than our forecast. EBIT margin declined by 80bps QoQ to 10.7% missing our forecast. As a result, EPS of Rs8.4, -3.3% QoQ was also a miss. Revenue from top-5 clients continued to outperform the company growth and was +0.2% QoQ, post a 16% CQGR in H1FY17. During the quarter US$10m+ clients grew by 1 QoQ to 11 and US$5m+ clients grew by 2 QoQ to 21. Cyient added 20 new clients in Q3FY17. For FY17, Cyient has reiterated its guidance for core business revenue growth of 10%+ and a 50% growth in DLM (design led manufacturing) business i.e., Rangsons. It has also maintained its EBITDA margin target of flattish margin YoY resulting in a double digit earnings growth....

On expected lines, Cyient posted a soft performance in 3QFY17, with revenue at US$135.8mn (-0.5% qoq; +0.6% in CC terms). Implied volumes declined 0.5% qoq, while pricing declined 1.1% qoq. An adverse cross-currency impact of 110bps was also witnessed. A positive factor was healthy growth in Design-Led Manufacturing (DLM) segment (10.2% qoq rise in USD revenue). EBITDA margin declined 66bps qoq on soft revenue. Another key positive was strong up-tick in order book. With 3Q being the key quarter for order intake, a healthy 292% qoq rise in Cyient Services order book executable beyond FY17E and 105% qoq rise in DLM order book beyond FY17E...

second straight quarter. Cyient added 23 new clients during the quarter. For FY17, Cyient has maintained its guidance for core business revenue growth of 10%+ and a 50%+ growth in DLM (design led manufacturing) business i.e., Rangsons. It has also maintained its EBITDA margin target of flattish margin YoY resulting in a double digit earnings growth....

Background: Cyient is a mid cap IT Company with FY16 revenues of INR 31.0bn specializing in engineering solutions, including product development and life cycle support, process, network & content engineering. In 2QFY17: Ex- DLM business, revenue share by geography: Americas (59.0%), Europe, Middle East, Africa & India (24.0%), and Asia Pacific (17.0%). Revenue share by business unit: Aerospace and Defense (36.8%), Transportation (9.4%), Industrial energy & Natural resources (9.3%), Semiconductor (4.1%), Medical & healthcare (1.9%), Utilities & Geospatial (16.7%), Communication (21.8%). Design Led Manufacturing Business: Revenue bu segment, Aerospace and defense (10.7%), Industrial (29.5%), Medical (12.4%), Communication (46.4%) and others (1.1%). Onshore/Offshore split: Onshore (40.1%), Offshore...

Cyient will report rupee revenue, PAT CAGR of ~16% each in FY16-18E deepak.purswani@icicisecurities.com (average 13.9% EBITDA margins in FY17-18E), vs. 21%, 18.5% CAGR...

Cyients 2Q robust performance (beat on both revenues and margins) was led by the Utilities Geospatial & Communication (UGC) and Rangsons ( 34% QoQ). Growth was lop-sided as the core engineering business (54% of revenue) grew by only 0.9% QoQ. Sustainability of current growth rate in 2H will be a challenge, unless we see meaningful traction in engineering business.

25th Year Milestone Quarter Outperformed on Revenue Growth, Highest in 22 Quarters: H1FY17 supported by a strong Q2 growth, but second half may witness a sluggish growth in the beginning due to less business days available during Q3FY17E. Cyienthas posted a revenue growth of 9.4% in INR terms and 9.5% growth in dollar terms during Q2FY17.

USD137m, compared to our estimate of USD129m. Services business grew 7.4% QoQ to USD123m (v/s our estimate of USD118m), registering the highest growth in 22 quarters. Services business grew across the board with the...

Moderate Capex Leads to Healthy Free Cash Flow Generation: During FY16, Cyient has recorded a cash balance of Rs.7741Mn (cash balanceincluding the liquid investments) after the four acquisitions made during FY15-FY16. Operating cash flow after adjusting the working capital changes, has picked up to 60.0% levels of EBITDA; it has witnessed 90.2% of EBITDA duringFY15. Cash per share has grown by 12.5% CAGR during FY12-FY16. Moderate capex (Capex/EBITDA multiple of 3.2x, 5.0x and 5.1x during FY16, FY17E and FY18E respectively) behind the healthy free cash flow generation.