IPO Note : Cyient DLM Private Limited by Nirmal Bang Ltd
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BACKGROUND
Incorporated in 1993, Cyient DLM is a subsidiary of Cyient. It provides electronic manufacturing services (EMS) and solutions. The company provides EMS as buildto-print (B2P) and build-to-specification (B2S) services. The core solutions provided by Cyient DLM encompass various key components, including printed circuit board assembly, cable harnesses, and box builds. These components play a crucial role in safety of critical systems such as cockpits, inflight systems, landing systems, and medical diagnostic equipment. It has a customer base which includes global OEMs in the aerospace and defence, medical technology and industrial sectors and its key customers include Honeywell International, Thales Global Services, ABB Inc, Bharat Electronics, and Molbio Diagnostics.
Objects and Details of the Issue:
The public issue consists of fresh Issue of Equity shares aggregating upto Rs. 592 Cr. The company proposes to utilise the Net Proceeds of the Fresh Issue towards funding working capital requirements, capital expenditures, repayment of debt and achieving inorganic growth through acquisitions.
Investment Rationale:
* EMS industry has strong tailwinds
* Provide end-to-end integrated solutions
* High entry barriers to business and customer engagement capabilities
* Expanding inorganically to increase geographic footprint
Valuation and Recommendation:-
Cyient DLM has strong industry tailwinds working in its favour as domestic EMS (electronics manufacturing services) industry is expected to grow at 32% CAGR over FY22-27. Over FY21-23 period, Cyient DLM’s revenue growth is lagging peers at 15% CAGR, however its strong order book provides decent visibility of accelerated growth going forward. It’s valuation on P/E basis is reasonable compared to peers, at 66.2x FY23 earnings, considering the future growth opportunities. We recommend subscribing to the issue from long term perspective.
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