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Geojit Financial
Cyient (Buy)
CMP: ₹447
Target: ₹540
Cyient Ltd, formerly known as InfoTech Enterprises is one amongst the leading players in the IT enabled services space providing services to the engineering research and development segment.
Key takeaways: a) Stable revenue growth with 16 per cent CAGR in the last five years from FY14. Fresh order intake in the services division to propel revenue growth to 14.2 per cent in FY21E from 3 per cent in FY20E.
b) Expansion of its R&D facility in Warangal with net addition of 600 employees to support telecom clients indicate strong momentum in communication vertical.
c) Well positioned in providing services to aerospace vertical and huge prospect to expand the defence segment which currently accounts for 5 per cent of total revenue.
d) Expect operating margin to improve in the range of 14-15 per cent when the cost optimisation programme ends by FY21E.
e) Currently trading at historically low valuation as weak margins and revenue growth in FY20 is already factored in.
We expect improvement in growth due to communication and transportation vertical and value Cyient at 9x FY22E EPS with a target price of ₹540 and recommend ‘Buy’ rating.
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