Buy Cyient; target of Rs 590: Edelweiss
Edelweiss' is bullish on Cyient has recommended buy rating on the stock with a target price of Rs 590 in its research report dated July 13, 2017.
Edelweiss' research report on Cyient
Cyient’s Q1FY18 revenue, at USD140.6mn (down 0.2% QoQ), came below Street’s 2.2% growth estimate. EBITDA margin, at 12.8% (down 50bps QoQ), was marginally lower than Street’s 13.0% estimate. Revenue drop is attributed to sharper than anticipated dip in design-led manufacturing (DLM, 26.5% QoQ) and weakness in Utilities & Geospatial business (down 7.0%). Management has maintained its ~12.5% revenue growth and 50bps margin expansion for FY18, leading to double-digit earnings growth. We remain positive on the stock given its better growth profile (12.3%/13.3% revenue/PAT CAGR over FY17-19E) versus peers due to exposure to ER&D & IoT segments. Maintain ‘BUY’ with revised TP of INR590 (from INR605) as we revise exchange rate and effective tax rate.
We believe that double-digit revenue growth guidance in core business, in an environment where most IT companies are guiding for mid-single digit revenue growth, demonstrates Cyient’s better quality business mix, led by ER&D and IoT. At CMP, the stock is trading at 12.2x FY19E EPS. We maintain ‘BUY/SP’ with revised TP of INR590.
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