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Cyient presented a cautious outlook owing to demand uncertainties from macroeconomic challenges further it faces near term headwinds due to management transition & its significant exposure to US of 51%, limits the scope for a sharp rebound. However, with a 35% stock correction since January, most negatives are likely priced in. As the environment improves, a potential recovery seems likely. Given these factors, we marginally lower our estimates by 4%, projecting Revenue/EBIT/PAT to grow at a CAGR of 5.4%/14.0%/17.9% over FY25–27E and maintain our rating to BUY but lower the target price to INR 1,555, implying a 20x PE on FY27E EPS of INR 77.8.

Cyient reported Q4FY25 marginally above estimates

• Revenue for Q4FY25 came at INR 19.1Bn, up 2.6% YoY but down 0.9% QoQ (vs consensus est. at INR 18.7Bn).

• EBIT for Q4FY25 came at INR 2.3Bn, down 12.4% YoY but up 11.1% QoQ (vs consensus est. at INR 2.3Bn). EBIT margin was down 211bps YoY but up 132bps QoQ to 12.3% (vs consensus est. at 12.1%).

• PAT for Q4FY25 stood at INR 1.9Bn, down 1.5% YoY but up 46.0% QoQ (vs consensus est. at INR 1.7Bn).

Over hang of cautious commentary, management transition & US exposure dims Q4 beat: In Q4FY25, Cyient secured 6 large deals, including 3 from top 10 clients, underscoring strong customer ties. However, DET segment revenue and EBIT fell short, highlighting the need for improved execution. Macro headwinds in March due to Trump tariff policies may slightly impact Q1FY26, but the effect is expected to be limited. Segment-wise, Healthcare & Automotive are expected to show positive momentum into FY26, while Sustainability needs mitigation efforts for potential Q2 seasonality weakness. Aerospace might see delayed macro effects. Connectivity remains resilient, with ongoing fiber design and rollout expected to continue for at least 2 more years despite recent softness. A 2–3 year roadmap is in progress. Guidance is paused to improve forecasting and give the new CEO time to assess operations. Despite ongoing deal ramp-ups and new leadership taking the charge, macro headwinds, soft demand, and tariff-related supply chain risks are expected to delay decisions in Q1FY26, potentially impacting growth and dragging the top-line performance in the following quarters.

EBIT margin outlook recalibrated downwards to 15% by FY27E: Cyient’s earlier target of a 16% margin within 12 months has been recalibrated downwards to stabilize at 15% over the next 24 months. Considering weak macro conditions, we anticipate a conservative margin expansion of up to 14% by FY27E. However, if the company delivers strong performance in upcoming quarters, the management's guided range may still be achievable. Financially, the company is strong, maintaining a solid cash position & now operating debt-free in DET. Cash generation remains a priority, with plans to use funds for dividends, semiconductor business needs, and M&A to strengthen the portfolio and close technology gaps. Attrition for the quarter was reported at 16.5%.

Management Call - Highlights

• The board has taken a decision to review the dividend policy to ensure enough cash is available to support growth. Any adjustment to the dividend policy will be made to invest the cash in opportunities, and not just for the sake of adjusting the dividend

• A final dividend of INR14 per share was announced in Q4FY25, translating to a full-year dividend of INR26 per share.

• The company is looking to enhance its portfolio using M&A to plug in gaps in its competence on emerging technologies

• The company has started working on building back its talent, with a focus on bringing back successful tenured employees who had left in the near past.

• Strategic Engagement for Hydrogen Project in Norway - Won a deal to support in the development and execution of hydrogen production and distribution facility in Norway. A major step in advancing Norway’s renewable energy ambitions, focusing on delivering green hydrogen to the maritime sector and heavy transport industries.

• Alliance with Micware Navigations in the Mobility space - Strategic partnership aims to deliver transformative solutions for intelligent mobility, focusing on safer, smarter, and more sustainable transportation systems.

• The company may need to recalibrate its previous margin target of 16% in the next 12 months to touching and staying steady at 15% over the next 24 months. The company aims to stabilize the margin trajectory at a number appropriate for the growth it will deliver over a 24-month time frame.

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