IGI Logo

Growth momentum intact; margins reflect upfront investments Operating performance below our estimates

* Cyient DLM (CYIENTDL)’s 2QFY27 consol. revenue grew 27% YoY to INR3.9b, largely aided by a 61%/2.5x YoY growth in the aerospace/ MedTech segments. EBITDA margin contracted 130bp YoY to 8.7%, because of gross margin compression due to the expensing of product development costs.

* We believe CYIENTDL’s growth story remains on track, supported by a record order book of INR28.1b (+23% YoY), continued aerospace momentum and a rising box-build contribution (37% in 2QFY27 vs. 25% in 2QFY26). However, upfront growth investments will keep FY27 EBITDA margins in the range of 9-10%. The sales and marketing platform is now in place to support a larger revenue base, positioning the company for operating leverage and double-digit margins from FY28 (refer to Exhibit 7). Beyond this, four Electronic Products programs worth a potential ~USD1b over 7–9 years offer a substantial growth opportunity from FY30.

* Factoring in revised EBITDA margin assumptions, we cut our earnings estimates by 16% for FY27 while maintaining our FY28/FY29 earnings estimates. We expect a CAGR of 30%/41%/63% in revenue/EBITDA/adj. PAT over FY26-29. We reiterate our BUY rating on the stock with a TP of INR1,320 (based on 50x Sep’28 EPS, implying a 0.8x PEG ratio)

Strong revenue growth supported by a record order book

* CYIENTDL’s consol. revenue grew 27% YoY to INR3.3b (in line). Revenue from Aerospace/Defense/MedTech grew 61%/11%/2.5x YoY, while revenue from Industrial/Auto & others declined 41%/86% YoY.

* The company’s order backlog expanded 23% YoY to INR28b, driven by a strong order intake of ~INR6.1b in 2QFY27 (vs. an avg. order intake of INR4.7b over the last eight quarters).

* Gross margin contracted 380bp to 37.4% due to prototype development, which led to an EBITDA margin contraction of 130bp YoY to 8.7% (est. 10.5%). EBITDA grew 10% YoY to INR342m (est. INR412m). Adj. PAT was up 26% YoY to INR158m (est. INR234m; PAT is adjusted for a gain of INR182m on the fair valuation of the earnout liability).

* In 1HFY27, CYIENTDL’s revenue/EBITDA/APAT grew 30%/30%/83% to INR7.7b/INR733m/INR367m.

* CFO dipped 90% YoY in 1HFY27 to INR142m due to higher raw material build-up amid the ongoing West Asia crisis. As of Sep’26, its net cash stood at INR226m vs. INR187as of Mar’26.

* NWC as of Jun’26 stood at 153 days (vs. 161 in 1QFY27 and 139 in 2QFY26).

Valuation and view

* CYIENTDL sustained strong growth in 2QFY27, with a record order book of INR28.1b reinforcing visibility for 2HFY27 and beyond. We believe the company is entering a multi-year growth phase, supported by

a) continued aerospace momentum

b) increasing box-build contribution and semiconductor equipment ramp-up

c) four Electronic Products programs, which are expected to scale meaningfully from FY30.

* We estimate a CAGR of 30%/41%/63% in revenue/EBITDA/adj. PAT over FY26- 29E. We reiterate our BUY rating on the stock with a TP of INR1,320 (50x Sep’28 EPS, implying a 0.8x PEG ratio).

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412