IGI Logo

EMS player backed by a strong promoter KEY CHANGES: TARGET ….

Cyient DLM Limited (CDL) is an integrated Electronic Manufacturing Services (EMS) and solutions provider with a focus on the entire life cycle of a product, including design, build, and maintenance. CDL’s solutions primarily comprise the manufacture of: (i) printed circuit board (PCB) assembly (PCBA), (ii) cable harnesses, and (iii) box builds, which are used in safety-critical systems in Aerospace &Defence, Medical, Industrial and Railways. Incorporated in 1993, CDL leverages the design capabilities of the Promoter, Cyient Limited, a leading engineering services provider with over three decades of domain expertise providing engineering and design solutions.

• The EMS industry in India is expecting rapid growth, with a CAGR of 32.5% between FY22 and FY27. It is projected that by 2026, India's EMS industry will contribute 7% (USD 80 billion) to the global EMS market.

• CDL enjoys long-term relationships with marquee customers such as Honeywell, Thales Global Services, ABB, Bharat Electronics and Molbio Diagnostics, having had an average relationship of over 11 years.

• They have three manufacturing facilities spread across Mysuru, Hyderabad, and Bengaluru and have a robust order book of Rs.2,432.5Cr. as of March 31, 2023.

• As of March 31, 2023, they had total borrowings of Rs.314.5Cr and a D/E ratio of 1.8 in FY23. Post-IPO, the debt will be minimal, which will reduce financial costs and increase earnings in the future.

• CDL’s revenue has increased from Rs.628Cr in FY21 to Rs.832Cr in FY23 at a CAGR of 15%. The net profit of the company has increased at a CAGR of 64% from Rs.11.8Cr to Rs. 31.7Cr during the same period, with a net profit margin currently standing at 3.8%.

• CDL undertook a pre-IPO placement of 40,75,471 equity shares to Amansa Investments (holds 8.7% in Promoter Cyient Ltd) at a price of Rs.265 apiece, amounting to Rs.108Cr.

• CDL has plans for inorganic expansion in key geographies, particularly in North America, to build greater geographical proximity with some of its key clients, utilising Rs.70Cr from the net proceeds in the next three years.

• At the upper price band of Rs.265, CDL is available at P/E of 66.2x (FY23), aligning with industry peers' valuations. The electronics industry in India is poised for growth, supported by government initiatives like Make in India, the Production Linked Incentive (PLI) Scheme, and the China + 1 Strategy adopted by OEMs. CDL has a bright future ahead considering its robust order book, reduced debt post IPO and strong promoter backing augurs well for the company. We assign a “Subscribe” rating for the issue on a short to medium term basis

Purpose of IPO

The offer comprises only fresh issues. The objects of the offer are to (i) fund incremental working capital requirements (Rs.291Cr).(ii) Funding capital expenditure (Rs43.6Cr).(iii) Repayment/prepayment, in part or full, of certain of the borrowings (Rs.160.9Cr).(iv) Achieving inorganic growth through acquisitions (Rs.70Cr) and general corporate purposes.

Key Risks

• Heavily reliant on the top 10 customers – 91% of total revenue from operations in FY23.

• Number of customers reduced from 50 in FY22 to 35 in FY23.

To Read Complete Report & Disclaimer Click Here

For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer 

SEBI Registration Number: INH200000345

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer