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Aiming at US$1 bn revenues in FY24

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%

Q2FY23 Results: Cyient reported acquisition led strong Q2 results.

* Services revenue grew 12.3% QoQ in CC terms & group revenue grew 10% QoQ in CC terms

* Normalised services EBIT margin without acquisitions came in at 13.2%, up by ~110 bps QoQ

* Won five large deals with total contract potential of US$ 105.2 million (mn)

What should investors do: Cyient’s share price has grown by ~1.5x over the past five years (from ~| 517 in October 2017 to ~| 765 levels in October 2022).

* We maintain our BUY rating on the stock

Target Price and Valuation: We value Cyient at | 910 i.e. 14x 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, rebound in DLM business 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 | 1,670

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SEBI Registration number is INZ000183631

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