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Slowdown in orders stifles near-term growth visibility

Earnings in line with estimates

* Cyient DLM’s (CYIENTDL) 4QFY25 consolidated revenue/EBITDA grew ~18%/51% YoY. EBITDA margins surpassed our estimates, expanding 290bp YoY, led by a favorable product mix, operational efficiencies, and one-offs (~250bp). Standalone revenue (ex of Altek) declined ~6% YoY in 4QFY25.

* The consol. order book continued its downward trend, declining 12% YoY/11% QoQ in 4Q to INR19b. The order book growth continues to remain a key concern; however, the company continues to see strong traction in its pipeline (client additions), with order conversions remaining a key priority for the management.

* We largely maintain our earnings estimates for FY26/FY27. We reiterate our BUY rating on the stock with a TP of INR600 (27x FY27E EPS).

Margin expansion leads to a favorable business mix

Consol. revenue grew 18% YoY to INR4.3b (est. INR4.6b) in 4QFY25, mainly led by the integration of Altek, while standalone revenue declined ~6% YoY to INR3.4b.

* The medical technology segment witnessed the highest growth (+3.7x YoY), followed by the industrial (+84% YoY) and aerospace (+56% YoY) segments. Meanwhile, the defense segment reported a decline of 43% YoY, driven by the completion of a large order from an Indian customer. The order book stood at ~INR19b as of 4QFY25 (down 12%/11% YoY/QoQ).

* EBITDA margin expanded 290bp YoY to 13.4% (est. 11.8%), while EBITDA grew 51% YoY to INR574m (est. in line). The expansion of EBITDA margin was driven by a favorable product mix, operational efficiencies, and a oneoff benefit from purchase price variance claims received from customers (which resulted in a margin expansion of ~250bp). Excluding the one-off, margins expanded ~30bp YoY to 10.8%.

* Adjusted PAT grew 36.5% YoY to INR310m (est. in line).

* In FY25, revenue/EBITDA/adj. PAT grew 27%/31%/21% YoY to INR15.2b/INR1.5b/INR739m. Net debt stood at INR440m vs INR4b as of Mar’24.

Highlights from the management commentary

Outlook: Margins are expected to remain in double digits on a full-year basis, though 1QFY26 may be softer. Debt levels have increased, but interest costs remain flat due to restructuring and the nature of the longterm, dollar-denominated debt.

* Altek: The integration of Altek is now fully complete. Cost pressures on the Altek side of the business are minimal as it is involved in high-value products, making it less price-sensitive compared to high-volume manufacturers.

* Order book remains under pressure as consumption growth by major clients outpaces new order growth. However, management anticipates strong traction in the North American market going forward, supported by ongoing discussions with three big global players.

Valuation and view

We expect growth momentum to slow down in the near term due to subdued order book growth. However, the full integration of Altek is expected to drive healthy financial performance.

* In the medium to long term, CYIENTDL is set to benefit from industry tailwinds, with India expected to maintain its growth momentum, supported by a competitive advantage stemming from tariff wars. Additionally, with the acquisition of Altek, the company can mitigate tariffs by leveraging its facility for onshore production and final assembly. Through its manufacturing operations in India, CYIENTDL can offer a cost-effective, low-tariff alternative for sourcing key components and assemblies to its customers.

* We estimate CYIENTDL to report a CAGR of 22%/34%/54% in revenue/EBITDA/adj. PAT over FY25-27E. We reiterate our BUY rating on the stock with a TP of INR600 (27x FY27E EPS).

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