Buy Cyient; target of Rs 440: ICICI Direct

ICICI Direct's research report on Cyient

Cyient Ltd (Cyient) reported a decent set of Q2FY21 numbers. Dollar revenues increased 3.4% QoQ (1.3% in constant currency terms) led by 1.7% QoQ growth in services revenues and 13.3% QoQ growth in DLM revenues. The growth in services revenues was led by communication (28.4% of revenues), up 7.7% QoQ and transportation (14.3% of revenues) up 21.6% QoQ, partially offset by a decline in aerospace & defence (27% of revenues), down 11.5% QoQ and semiconductor, IoT and analytics (5.3% of revenues) down 2.3% QoQ. In terms of margin, services EBIT margins increased 542 bps QoQ to 12.2% led by higher utilisation, lower subcontracting cost and lower restructuring cost.

Outlook

Hence, we upgrade the stock from HOLD to BUY with a revised target price of Rs 440 (10x FY23E EPS).