Motilal Oswal's research report on Cyient
Cyient (CYL)’s operating performance has inherently been subdued over the past several years as a few of its growth engines remained weak and underperformed that of its peers. In addition, execution challenges have marred the company’s overall topline growth. According to the management, the challenges under Aerospace and Communications segments (~50% of service revenue) have bottomed out and these segments are likely to improve and stimulate overall organic growth (guided at 13-15% in constant currency (CC) terms) in FY23E. Additionally, its revenue growth should also amplify led by the inorganic components (~14-15% of FY23E revenue) and gradual recovery in its Design Led Manufacturing (DLM) business (guided high single-digit CC growth).
However, our base case still remains the same given the ongoing macro headwinds and the company-level execution challenges. The current valuations at 18x/14x FY23E/FY24E EPS of INR51.9/INR68.6 appear highly attractive giving us more comfort to maintain our BUY rating. Our target multiple of 17xFY24E EPS implies a TP of INR1,170, with 21% potential upside.
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