Small-cap IT player Cyient DLM's shares soared over eight percent in trade on March 28, after domestic brokerage Kotak Instutitional Equities upgraded its rating on the stock. Further, Motilal Oswal picked up 5.3 lakh shares in the previous session, in a bulk deal.
Kotak hiked its rating to 'Reduce', from 'Sell', earlier, on account of the stock's sharp price correction. However, on the flip side, the brokerage cut its fair value target on shares to Rs Rs 440, down from Rs 560 earlier.
Cyient DLM is expected to be a potential beneficiary of a pickup in European defense ordering. However, a muted order backlog, delay in order finalization by US customers due to tariff uncertainty and lower revenue growth in the domestic market after completion of the BEL order will lead to a weak start to FY2026 for Cyient DLM, noted Kotak.
At 3.05 pm, shares of Cyient DLM were trading at Rs 458.6 per share, higher by 2.8 percent on NSE.
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The ramp-up of orders from new clients, the impact of the Altek acquisition and further client
additions remain key monitorable, noted the brokerage. Cyient has mixed trends across its major export geographies:
- Europe: Cyient has healthy exposure to the European defense space through clients such as Thales, Safran and BAE, which should potentially see order inflow pickup driven by increased European defense spending.
- USA: In the US, Cyient has been onboarded for two key programs by Honeywell Anthem and Micro VCS, and it expects revenue to come back from ABB, given the expectation of a recovery in the US oil & gas market. However, this has been offset by continued weakness seen in Boeing-related orders due to program deferrals.
- India: In India, BEL has been the main driver of revenue over the past two years; however, with no major tenders or orders in the pipeline, we expect a weak domestic market ordering in 1HFY26.
Cyient DLM’s 39 percent/45 percent of revenues in FY2024/9MFY25 came from domestic market, largely driven by the BEL order. "With the order reaching completion stage, we now expect domestic revenue to remain muted in the near term," said Kotak.
On the exports front, Kotak sees the European defense segment, new logo addition and Altek acquisition to aid revenues. "Overall, we expect FY2026 revenue growth to come in at 5 pecent versus 32 percent earlier, largely on the back of weak domestic revenues," added the brokerage.
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