Buy Cyient DLM Ltd for the Target Rs.830 by Motilal Oswal Financial Services Ltd
At the cusp of a growth inflection
Cyient DLM Ltd (CYIENTDL) is an emerging design-led electronics platform serving Aerospace & Defense, Industrial, MedTech, and Automotive end-markets (with AI data centers and robotics segments expected from FY27 onwards), positioned at the intersection of several technology and manufacturing megatrends. As global OEMs increasingly seek integrated partners capable of supporting products from development through commercialization and lifecycle management, CYIENTDL is well placed to capture a larger share of the electronics value chain.
* CYIENTDL is evolving from a traditional EMS vendor (PCBA+Box-Build) to a Buildto-Spec (B2S mix to increase from 6% in FY26 to double digits by FY28) and a platform-partner model, embedding itself across design, engineering, certification, manufacturing, and lifecycle support. This significantly increases switching costs and extends customer relationships from annual purchase orders to 10-15+ year program partnerships, enabling the company to capture a larger share of value across the electronics product lifecycle.
* Aerospace provides the foundation for this transformation, supported by:
a) record global aircraft backlogs (of 12 years)
b) multi-decade platform lifecycles
c) rising electronics content per aircraft
d) key B2S wins (such as Deutsche Aircraft's D328eco program and Skydrive’s eVTOL project) and platform partnerships (like Boeing 787), which provide long-duration revenue visibility and validate CYIENTDL's ability to participate in high-value, design-led manufacturing programs.
* Additionally, a substantial growth opportunity lies beyond Aerospace, with Industrial and Automotive emerging as the next growth pillars. Exposure to semiconductor equipment, AI infrastructure, clean energy, B2B smart metering, and EV electronics (BMS) positions CYIENTDL to benefit from multiple simultaneous, policy-supported capex cycles and the structural increase in electronics content across industrial and mobility platforms.
* Further, Altek (US acquisition) significantly strengthens CYIENTDL’s growth runway by providing:
a) a North American manufacturing footprint,
b) International Traffic in Arms Regulations (ITAR)-compliant capabilities
c) access to high-value Industrial, MedTech, and Defense customers. Beyond revenue addition, the acquisition creates meaningful cross-selling opportunities and enhances CYIENTDL’s ability to offer global, dual-region engineering and manufacturing solutions.
* Overall, we like CYIENTDL from current levels as the base has normalized following the execution of the large BEL defense order (~32% of FY25 revenue but a low-margin order). Coupled with a strong 1.9x book-to-bill ratio (vs. 1.3x in FY25) and 41% growth in FY26 order inflows, this provides robust growth visibility. We expect CYIENTDL to deliver a CAGR of 27%/40%/67% in Revenue/EBITDA/Adj. PAT over FY26-28 and reiterate our BUY rating with a TP of INR 830, based on 41x FY28E EPS.
Business model transformation
* CYIENTDL's transformation extends beyond the shift from pure EMS to B2S. The company is evolving from a project-based manufacturer to a platform supplier participating across the entire product lifecycle (Product Design → Engineering → Qualification → Manufacturing → Lifecycle Support). The significance lies in transitioning from annual purchase orders to decadelong production programs, a model followed by global aerospace and industrial electronics suppliers (such as Plexus Corp and Sanmina).
* The company's SET (Strengthen-Expand-Transform) framework closely mirrors the evolution path adopted by global aerospace suppliers. The first phase focuses on deepening core OEM relationships (by FY26-27), followed by expansion into automotive, defense, robotics and AI-led opportunities through M&A and integration (by FY27-29). The final phase involves transitioning to a product- and platform-led model (by FY27-32) (Refer to Exhibit 5).
* The key evidence of this transition is the increasing contribution from B2S programs. While B2S contributed ~6% of FY26 revenue, we expect double-digit contribution by FY28. More importantly, several programs are still in the development stage and are likely to contribute materially after 2 years down the line, indicating healthy visibility of the growth pipeline.
* Unlike traditional EMS contracts, where customers can easily switch suppliers, B2S engagements embed CYIENTDL into product architecture, validation, and certification processes. In aerospace and industrial electronics, this often results in supplier relationships lasting for an entire platform lifecycle of 10-15 years (Refer to Exhibit 1).
* The company's recent engineering investments, dedicated testing infrastructure, and B2S labs indicate that management is strategically positioning CYIENTDL to capture a larger share of the growing electronics manufacturing market.
* Our research also indicates that platform-based OEMs globally seek fewer, but more capable, partners that can provide integrated design-to-manufacturing solutions.
* We believe the successful execution of this transformation could gradually shift CYIENTDL's margin profile from the current 9-11% to 13-14%.
Valuation and view
* CYIENTDL’s growth in FY26 was impacted by the execution of the large but lowmargin BEL defense order (32% mix of FY25 revenue). With this order now executed, the base has been normalized. Meanwhile, the company ended FY26 on a strong footing, with its order book increasing 27% YoY to INR24.2b and the book-to-bill ratio improving to ~1.9x (vs. 1.25x in FY25), providing healthy revenue visibility and laying the foundation for the next phase of growth.
* We believe the company’s growth trajectory will remain strong, backed by:
1) increasing contribution from higher-value B2S programs (double-digit contribution by FY28E)
2) a robust order pipeline reflected in a 41% growth in FY26 order inflows and a strong 1.9x book-to-bill ratio repeat above
3) the ramp-up of marquee aerospace platforms and new program wins (such as D328eco, Thales, Honeywell)
4) growing exposure to industrial, AI infrastructure, semiconductor equipment, clean energy, and automotive electronics
5) enhanced customer access and cross-selling opportunities through the Altek acquisition.
* We expect CYIENTDL to deliver a CAGR of 27%/40%/67% in revenue/EBITDA/Adj. PAT over FY26-28 and reiterate our BUY rating with a TP of INR 830, based on 41x FY28E EPS.
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