Stocks

Broker's call: Cyient (Buy)

| Updated on July 16, 2021

Motilal Oswal

Cyient (Buy)

Target: ₹1,090

CMP: ₹1061.7

Cyient’s Q1-FY22 revenue de-grew 4 per cent q-o-q in USD terms (in line with our estimate). This was led by 20 per cent q-o-q decline in the DLM business (on negative seasonality) and a flattish performance in the Services business.

The $3 million impact during the quarter was attributable to supply-led issues. The management retained its guidance for double-digit growth in the services business and 20 per cent y-o-y growth in the DLM business in FY22. Within the services business, growth in utilities (4.4 per cent q-o-q), aerospace (2 per cent q-o-q), and communications (2 per cent q-o-q) was offset by decline in Rail Transportation (2.5 per cent q-o-q).

We see increasing spends in the ER&D industry and Cyient’s strategy to digest these spends as a supporting factor in the near-to-medium term. The management strategy to leverage these spends – led by a refreshed GTM strategy and a higher focus on large deal wins – should augur well in terms of growth performance.

We raise our estimates on better potential margin performance as the management increases its intake of freshers as well as benefits from operating leverage. We maintain our Buy rating on attractive valuations.

Published on July 17, 2021

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