IGI Logo

Organic Recovery Underway; TAO Adds to Growth Visibility

Cyient DET’s Q2FY27 operating performance improved, supported by resilient Mobility growth, stronger order intake and margin expansion, although organic growth remained modest amid macro uncertainty and weakness in Strategic Markets. The management remains confident of a stronger H2, supported by a record Q2 order intake of USD 158.4 Mn (+20.8% YoY), improving Energy traction, TAO Digital integration and a healthy deal pipeline. TAO Digital provides an incremental growth lever, with annualised revenue approaching USD 100 Mn. DET EBITM expanded to 14.2%, highest in ten quarters, while Semiconductors offers longer-term growth optionality, with FY28 breakeven intact but potentially delayed by 1–2 quarters due to supply constrain

Organic Revenue In Line; Margin Expands; TAO Digital Acquisition Closed

* Revenue for Q2FY27 came in at INR 16.6 Bn, up 8.1% QoQ and 15.7% YoY (vs CIE est. of INR 15.5 Bn)

* EBIT for Q2FY27 came in at INR 2.3 Bn, up 16.8% QoQ and 35.3% YoY (vs CIE est. of INR 2.0 Bn). EBIT margin stood at 14.2%, up 107 bps QoQ and 206 bps YoY (vs CIE est. of 13.3%)

* PAT for Q2FY27 came in at INR 1.5 Bn, up 17.1% QoQ and 12.0% YoY (vs CIE est. of INR 1.7 Bn)

DET Growth Improves; Mobility, Order Wins & Semiconductors Support H2

Cyient DET reported Q2FY27 revenue of USD 174.2 Mn, up 7.5% QoQ/6.3% YoY CC, with organic growth at 1.6% QoQ/0.4% YoY. Mobility led growth at 4.5% QoQ/16.5% YoY, while Strategic Markets declined 1.5% QoQ. Order intake rose ~21% YoY to USD 158.4 Mn, supporting H2 recovery alongside TAO integration and the EUR 50 Mn framework agreement. Semiconductors grew 8% QoQ for the 6th consecutive quarter, with a >USD 100 Mn ASIC pipeline and AI/datacentre products expected from FY28. Supply constraint may temper near-term growth, while FY28 breakeven could slip 1–2 quarters. We expect H2FY27 performance to improve, supported by TAO Digital integration, recovery in Strategic Markets, a healthy order pipeline & ramp-up of EUR-50 Mn annual framework agreement, although full-scale execution may take 1–2 years

Margin Expands to 10-Quarter High; Cost-optimisation to Offset Wage Hike

Cyient DET’s Q2FY27 EBITM expanded 107 bps QoQ and 206 bps YoY to 14.2%, its highest in ten quarters, driven by cost-optimisation, higher billing days and TAO Digital’s contribution. Group EBITM rose 52 bps QoQ to 10.2%, despite semiconductor R&D investments. The management expects ongoing cost efficiency to offset H2 wage hikes and sustain FY27 margin expansion. We expect DET margin to remain resilient through FY27, with further improvement dependent on sustained organic growth, operating leverage and successful integration of TAO Digital.

View & Valuation: Reflecting modest organic growth, gradual recovery trajectory and TAO acquisition, we revise our FY27/FY28 earnings estimate upwards by 5.7%/10.3% and value DET at 10x FY28–29E average EPS. We value Semiconductor business at a 50% discount to its recent USD-300 Mn fund-raise valuation, balancing long-term strategic potential against execution & profitability risks. We arrive at a SOTP-based TP of INR 1,250 and retain ‘ADD’ rating.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer

SEBI Registration no.: INZ 000160131