Buy Cyient; target of Rs 2700: Emkay Global Financial

Emkay Global Financial's research report on Cyient

Cyient reported steady operating performance in Q3. DET revenue grew 0.4% QoQ (CC: 1.1%) to USD179.2mn, largely in line with estimates. Adjusted EBIT margin for the DET segment declined by 50bps QoQ to 16%. Deal wins for Q3 grew 61.7% QoQ to USD297.3mn (book-to-bill: 1.7x). Management highlighted that while the overall environment remains challenging, there are signs of some green shoots, which can potentially accelerate growth in H2CY24. Sustainability BU is expected to maintain growth momentum, as it is a multi-year growth opportunity. Connectivity BU is bottoming out and expected to retrace growth in Q4. Citing right-shifting of projects, Mgmt has cut FY24 DET revenue growth guidance to 13-13.5% CC (earlier 15-20%), broadly in line with expectations; this implies 0.5-3% QoQ growth in Q4,. It has also narrowed down DET EBITM improvement guidance to 200-250bps from 150-250bps. We incorporate provision for the civil class action anti-trust lawsuit settlement in FY24 and largely retain FY25-26 estimates.

Outlook

We maintain BUY, with unchanged TP of Rs2,700 (valuing the DET business at 27x Dec-25E EPS; Rs259 for DLM).