Buy Cyient; target of Rs 565: Reliance Securities
Reliance Securities recommended buy rating on Cyient with a target price of Rs 565 in its research report dated July 13, 2017.
Reliance Securities' research report on Cyient
Cyient’s USD revenue declined by 0.3% QoQ to US$140.6mn in 1QFY18 vs. our estimate of 2.9% QoQ growth. However, core business showed a decent 3% QoQ growth, which comes on top of a 3.3% QoQ growth in 4QFY17. The core ENGG business grew by a solid 4% QoQ in USD terms, which comes on top of a 3.5% QoQ growth in 4QFY17. On the other hand, the DNO business clocked 1.7% QoQ growth in USD revenue (3% QoQ growth in 4QFY17). However, the DLM segment (Rangsons) has reported a disappointing 26.2% QoQ decline in USD revenue. On the positive side, on a YoY basis, DLM revenue grew 17.2%.
At CMP, the stock trades at a PE of 12x FY19E EPS, which we believe to be reasonable given improving metrics in core business, margin expansion, strong traction in most verticals, strong client relationships, decent dividend yield, quality balance sheet and healthy EPS growth (19% CAGR) over FY17-FY19E. We are enthused by the strong traction Cyient is witnessing in its business and believe that it should command a higher multiple in light of better growth. We retain our BUY recommendation on Cyient with an unchanged Target Price of Rs565.
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