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Cyient reported weak operating performance in DET, in Q4. DET revenue degrew 3.0% QoQ (1.9% cc) to USD170mn. DET EBITM declined by 48bps QoQ to 13.0%, lower than our estimate. The management attributed revenue weakness to increased macro uncertainties which impacted the demand environment during the later part of Q4. While there are some near-term uncertainties that would weigh on revenue growth in H1FY26, the company believes that its well-balanced portfolio with three growth vectors (recently carved out semicon business, DET business, DLM business) has positioned it well to participate in a wide spectrum of growth opportunities. The management lowered DET margin expectations to ~15% in the next 24 months (earlier expected ~16% by Q4FY26). The company stopped providing guidance, albeit temporarily, citing the transition to new leadership, need for greater clarity on macros, and ongoing evolution of the newly established semicon business. We cut FY26/27E EPS by 8%-10%, given the Q4 miss. We maintain REDUCE, cutting our TP by ~7% to Rs1,270, valuing the DET business at 16x Mar-27E and the DLM business at 20% discount to its CMP.

Result Summary

Cyient’s DET revenue de-grew 3.0% QoQ (1.9% CC) to USD170mn, missing our estimates. Except sustainability (1.1% QoQ cc increase), all other verticals posted sequential decline in revenue, with Transportation, Connectivity, and New Growth Areas falling 1.1%, 4.0%, and 5.9% QoQ cc, respectively. Among geographies, Asia Pacific and Americas fell 18.2% and 0.8% QoQ in USD terms, respectively, while EMEA grew 4.8%. Revenue for the top-5 and top-10 clients declined 7.5% and 3.9% QoQ, respectively. DET EBIT margin contracted by 48bps QoQ to 13.0% due to revenue degrowth. The company recorded a weak order intake of USD184.2mn in Q4. It also won 6 large deals with total contract potential of USD83.5mn. Total headcount declined for the fifth consecutive quarter, by 1.6% QoQ to 14,151. What we liked: Healthy cash conversion. What we did not like: Operating performance miss, weak deal intake.

Earning call KTAs

1) CYL launched a semiconductor subsidiary and appointed Suman Narayan as the CEO of Cyient Semiconductors. 2) New CEO Sukamal intends to focus on improving execution and has started taking some steps to improve execution which will improve growth predictability. 3) The Aerospace segment has not seen much impact from tariffs. MRO work is linked with flying hours, which remain steady. Connectivity was impacted by delayed deal closure. 4) The Sustainability segment to be divided into 3 parts: minerals & mining, energy, utility & geospatial, wef Q1FY26. Energy business likely to benefit from the recent hydrogen deal in Norway. 5) CYL plans to start reporting semicon subsidiary CSPL’s financials from Q1FY26. 6) It has observed some projects deferments, delay in ramp ups that would weigh on Q1 performance. 7) Of the six large deals won in Q4, two are from Aerospace and two in Communications. 3 deals came from the top-10 clients.

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