Buy Cyient; target of Rs 590: Edelweiss

Edelweiss' research report on Cyient

Cyient’s Q2FY18 revenue, at USD150.1mn (up 6.7% QoQ), beat Street’s 6.6% growth estimate. EBITDA margin, at 14.6% (up 180bps QoQ), also surpassed the 13.9% estimate. Robust communication and transportation verticals spearheaded revenue surge. Management has maintained guidance of ~12.5% revenue growth and 50bps margin expansion leading to double-digit earnings spurt in FY18. Overall demand commentary was positive with strong growth anticipated in aerospace & defence, utilities & geospatial, transportation and semiconductor verticals. We remain positive on the stock given its superior growth profile (12.4%/13.3% revenue/PAT CAGR over FY17-19E) versus peers due to exposure to high growth ER&D & IoT segments. Maintain ‘BUY’ with TP of INR590.

Outlook

We believe, 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 12.3x FY19E EPS. We maintain ‘BUY/SP’ with TP of INR590.

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