Accumulate Cyient Ltd For Target Rs.2,066 By Geojit Financial Services Ltd
Near term pick up in order inflow
Cyient Ltd., is one of the leading players in the IT-enabled services space, providing services to the Engineering Research and Development segment.
* In Q2FY25, Cyient reported moderate revenue growth of 4% YoY to Rs. 18,491cr. Design-led manufacturing (DLM) segment revenue surged by 33.4% YoY, attributed to defense & aerospace. whereas DET (Digital engineering technology) softened by 1.8% YoY, driven by decline the sustainability sector growth
* EBITDA margin declined by 227bps YoY to 16% due to an increase in inventory loss and other expenses. However, PAT improved by 0.4% YoY at Rs.179.1cr, due to an increase in other income (279%).
* In DLM, the defence & Aerospace segment (constituting 86%) grew by 82% & 20% YoY respectively, owing to large deal wins from Indian defence sector. However, Industrial de-grew by 55% due to lower demand from key customers.
* Energy & Utility sector saw a seasonal decline, with a 6.4% drop QoQ and 2.2% YoY. New growth areas, driven by Healthcare, Life Sciences, Automotive, and Semiconductors, grew 9.7% QoQ and 6.7% YoY.
* The company anticipates a rebound in order intake in the second half of the year, despite a 14.7% decrease this quarter, noting that improvements in executions are likely to improve going forward.
Outlook & Valuation
The company displayed a moderate growth in revenue, mainly aided by the defence segment’s revenue growth. Due to seasonality, the order intake decreased; it is anticipated to rebound in the second half. With a primary focus on the energy sector, the company has acquired an organization in the UAE to access the MEA area. Despite the seasonal impact, Q3FY25 is expected to outperform YoY, driven by pick up in order inflow and widespread organic growth across various verticals. Therefore, we expect earnings to grow by a CAGR of 11% during FY24 –26E and maintain Accumulate rating with a revised target price of Rs. 2,066 based on SOTP valuation.
For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer
SEBI Registration Number: INH200000345