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Transition underway, execution remains key

We attended CYIENT’s Investor Day, where management outlined its strategy to pivot from project-led ER&D toward lifecycle engineering and annuity-based models, with the objective of improving predictable and quality revenues. The strategic pivot expands Cyient’s addressable opportunity beyond the ~USD 100bn traditional ER&D outsourcing market to ~USD 2.4–3.2tn of outsourced spend across the broader asset lifecycle. Cyient has already established a foothold in the after-sales opportunity, with access to 58% of its Top 200 accounts in after-sales services and aims to increase the contribution of after-sales/lifecycle services to 25% of revenue and recurring revenue to 50%. Additionally, the improving NN order intake (+64% YoY in FY26) within its selective buckets (Transportation, Wireless Connectivity and Energy) drives better revenue visibility in the medium-term. However, project-based work still contributes significantly at ~25–30% of revenue, while ~55–60% of contracts get renewed quarterly, resulting in growth volatility. Cyient aspires to drive more annuity-based arrangements by

(1) offering a breadth of service portfolio

(2) having established senior leaders to dedicated BUs

(3) fixing internal constraints to drive better execution. With this, Cyient aspires to deliver revenue CAGR above industry peers with 15%+ EBIT margin in FY28-29, followed by industry-leading growth and 16%+ EBIT margin by FY31. We believe that the pivot towards managing lifecycle engineering can structurally improve the quality of Cyient’s revenue; however, the key monitorable remain the success rate and execution within its marquee accounts. We have not integrated Tao Digital’s financials, as the acquisition is yet to be completed and have largely maintained our FY27E and FY28E DET USD revenue growth estimates, while marginally increasing our EBIT margin estimates to 13.5% and 14.0% (13.2% and 13.7% earlier), respectively. We maintain our HOLD rating with a TP of INR 1,040, based on the SOTP methodology.

Medium term & Long-term growth aspiration:

Management aspires to deliver doubledigit revenue growth in the medium term, supported by scaling lifecycle/after-sales services, large deals and regional expansion, with growth expected to move toward ~20%. In the long term, Cyient targets industry-leading revenue CAGR, driven by a larger contribution from lifecycle and recurring revenues

Margin aspiration:

Management targets 15%+ EBIT margin by FY28-29 and 16%+ by FY31, supported by higher mix of lifecycle and annuity-based revenues, scaling of large deals, portfolio optimization, and operating leverage from improved utilization and productivity. Margin expansion is also expected from reducing the long-tail account base and G&A intensity, while the shift toward higher-value lifecycle/managed-services engagements should improve revenue quality and profitability

Driving growth through emerging regions & markets:

Management identified AI datacenters, Defense markets, Indian PSU’s & HiTech as new emerging markets to unlock non linear growth to scale over the next 2-3 years, while accelerating regional footprint in India, Middle east & Japan regions to tap into regional initiatives to achieve 20%+ YoY growth in the medium term.

Capital Allocation policy:

Management remains focused on balancing organic growth investments, strategic M&A and shareholder returns, with 50% of PAT targeted for distribution to shareholders. The company plans to invest 0.5-1.0% of revenue toward technology and 1-1.5% toward capex, supporting its lifecycle engineering pivot and capability enhancement, while retaining flexibility for strategic M&A aligned with its growth objectives

Aspiring to be largest Indian semiconductor company:

CYIENT is targeting 4x revenue growth from current levels by FY31 with 20%+ EBIT margins in its semiconductor business, aiming to be India’s first Fabless semiconductor product company. The management targets ~4-5x growth in the ASSP business supported by the Kinetic acquisition & ~2-3x growth in the ASIC business, estimating a USD 2tn+ global semiconductor market by 2029

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