Buy Cyient; target of Rs 570: HDFC Securities
HDFC Securities has recommended buy rating on Cyient with a target price of Rs 570 in its research report dated July 14, 2017.
HDFC Securities’ research report on Cyient
Cyient 1QFY18 numbers were muted led by steep fall in Design Led Manufacturing (DLM) business (~9% of revenue, -26% QoQ), however revival in core IT services (+3.3% QoQ) was encouraging. Management remains optimistic about Cyient’s growth prospects. It has reiterated its guidance for double-digit growth in the core business, 20% YoY growth in DLM and a 50bps margin expansion despite rupee appreciation.
We expect USD revenue to grow 13.2/15.5% in FY18/19E. We expect margins to expand ~60bps in FY18E to 14.0%, led by a break-even in DLM margins (currently loss at operating level). In view of sustained recovery in core business, gradual pick-up in DLM, reiteration of double digit growth guidance we remain positive on the stock. We maintain BUY with a TP to Rs 570, implying 13x FY19 earnings.
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