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Transformation Underway; Growth Visibility Improving

We attended Cyient’s Investor Day and key takeaways are: (1) Cyient is pivoting from a project/capacity-led model towards lifecycle ownership, leveraging its deep domain expertise to expand wallet share and capture a larger pie of customer value pools; (2) DET is moving from stabilisation to transformation, with a record ~USD 300 Mn qualified large-deal pipeline, improving order momentum and new growth opportunities across AI Data centres, Defence, Indian PSUs, Hi-Tech and newer regions; (3) Cyient is building a differentiated fabless semiconductor platform, with ASIC and Kinetic-led ASSP businesses, a USD 100 Mn+ custom-ASIC pipeline and ambition to scale up revenue ~4x by FY31; and (4) Margin recovery remains on track, although the 15% EBIT margin ambition has shifted, from Q4FY27 to FY28, supported by SG&A optimisation, AI-led productivity, technology payback and operating leverage. We believe the Investor Day takeaways strengthens the medium-term growth and earnings-quality thesis, although large-deal conversion and the pace of growth recovery remain key execution watchpoints. We maintain our ‘BUY’ rating on CYL and raise our TP to INR 1,200

DET: Large-Deal momentum Improves; Conversion Key to FY27 Recovery

The near-term growth narrative remains centred on DET, where the setup appears to be improving but conversion remains the key variable. Order intake grew 5.4% YoY and the qualified large-deal pipeline has reached a record ~USD 300 Mn, while key-account order intake grew 11% and large-deal momentum improved 64% YoY, providing better visibility into the recovery. The management outlook remains measured, targeting consistent positive growth in the near term before moving towards double-digit growth over the medium term. We see AI Data centres, Defence, Indian PSUs and Hi-Tech, alongside geographies such as, India and the Middle East, as key incremental growth pools, supported by focused investments/ M&A and a broader domain + data engineering + cloud/software proposition. The key takeaway is that FY27 remains a transition year, with meaningful acceleration dependent on largedeal conversion, lifecycle-led wins and regional expansion.

Semiconductors: Fabless Strategy Creates New Medium-term Growth Lever

Cyient is scaling up semiconductors as a fabless product business, owning IP and product definition through finished-silicon delivery via a global manufacturing ecosystem. The business spans ASICs and Kinetic-led ASSPs, with reusable IP enabling expansion across AI/data centres, Automotive and grid/electrification. From USD 65 Mn in FY26, the management targets ~4x revenue growth by FY31, with around 20% EBIT margin, despite continued R&D investments. Traction is improving, with a USD 100 Mn+ custom-ASIC pipeline, while the Kinetic acquisition, GaN power ICs and Global Foundries partnership strengthen its product portfolio and manufacturing access. EBIT breakeven is expected in FY28, with scale-up and IP reuse driving operating leverage. We see semiconductors as a meaningful medium-term value-creation lever, given the shift towards higher-value, IP-led revenues.

15% EBIT Ambition Deferred to FY28; Operating Levers Intact

Margin recovery remains on track, although the 15% EBIT margin ambition has been pushed out, from Q4FY27 to FY28. DET EBIT margin improved 79bps QoQ to 13.2% in Q1FY27, with further upside expected from SG&A optimisation, AI-led productivity, technology-investment payback and operating leverage, while pricing discipline should partly offset mix and wage-cost headwinds. Management targets 15%+ EBIT margin with revenue CAGR above peers in FY28–29, rising to ~16% by FY31, as lifecycle-led, higher-value work scales up. We see the margin trajectory as credible, but faster growth and large-deal conversion remain key to unlocking operating leverage.

Valuation

Based on our SoTP valuation, we continue to value the DET business at 10x FY28E EPS, reflecting gradual margin improvement and the long-term growth opportunity, while balancing execution risks. We also value the semiconductor business at a 50% discount to its recent USD 300 Mn fund-raise valuation, recognising its long-term strategic potential while factoring in execution risks. We continue to apply a 15% holding company discount to the value of the DLM stake. Our SoTP-based TP of INR 1,200 supports our ‘BUY’ rating.

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