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Maintain revenue guidance of US$1 bn in FY24; DLM business files for IPO

About the stock: Cyient Ltd (Cyient) offers engineering & development services to aerospace & defence, transportation, E&U, communication and others.

* Cyient has 300 customers across 14 countries

* Net debt free and healthy cash flow with OCF/EBITDA ~80%

Q3FY23 Results: Cyient reported strong Q3 results.

* Services grew 11.9% QoQ in CC terms with organic contribution of 3.7%

* Normalised services EBIT margin without acquisitions & exceptional items increased ~190 bps to 15.1% ? Order intake increased 83.4% QoQ & 18.2% YoY to US$237.1 million (mn)

What should investors do? Cyient’s share price has grown by ~1.4x over the past five years (from ~| 581 in January 2018 to ~| 876 levels in January 2023).

* We maintain our BUY rating on the stock

Target Price and Valuation: We value Cyient at | 1020 i.e. 15x P/E on FY25E EPS

Key triggers for future price performance:

* Acquired entities to provide diversification, which, in turn, is expected to provide growth, looking at US$1 bn revenues in FY24

* Improved demand from large deals, healthy order book and organisation restructuring to accelerate growth

* Strategic buyout a multi-year arrangement with an auto major

Alternate Stock Idea: Apart from Cyient, in our IT coverage we also like Infosys.

* Strong revenue guidance prompts us to be positive

* BUY with a target price of | 1,730

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