Buy Cyient; target of Rs 780: ICICI Direct

ICICI Direct's research report on Cyient

US$ revenues grew 8.3% QoQ to $164.6 million, above our 7.6% QoQ growth and $163.5 million estimate Revenues in rupees grew 8% QoQ to Rs 1061.8 crore, above our Rs 1052.3 crore estimates EBITDA margins fell 50 bps QoQ to 14.1%, below our 30 bps decline, 14.3% estimate mainly due to higher material cost (up 76% QoQ) Reported PAT of Rs 118.4 crore was above our Rs 96.1 crore estimate on account of lower-than-expected tax rate (ETR of 21.3% as a percentage of PBT vs. our estimate of 28%) and higher other income (Rs 40.8 crore vs. Rs 27.3 crore in Q3FY18) The company declared a final dividend of Rs 4/share taking the full year dividend to Rs 13 per share.

Outlook

Cyient reported Q4FY18 numbers wherein revenues were above our estimates mainly on account of higher-than-expected growth in the Rangsons business. A positive outlook for services and DLM, traction across business verticals would lead to strong earnings growth of 16.5% CAGR during FY18-20E. We upgrade Cyient to BUY rating on the back of sustained earning growth momentum and revise our target price to Rs 780.