Hold Cyient; target of Rs 1200: Prabhudas Lilladher

Prabhudas Lilladher's research report on Cyient

The operating performance was yet again disappointing with revenue decline of 1.9% QoQ CC, below PLe of 0.9% QoQ CC decline. The macro uncertainty hit the operating performance of the company at the fag end of the quarter. The impact was visible across verticals and geographies (ex-Europe). The management indicated that the softness should continue in the subsequent quarters, however the degree of impact would be lesser than that of Q4. We believe the combination of CYL’s structural challenges along with the heightened macro uncertainties would have a twofold impact in its operations to drive growth in the near/mid-term. Additionally, the transition of the new CEO in the current environment would be challenging, although the management was optimistic to bring immediate focus and drive stability to its current operations. Given a blurry outlook for FY26E/FY27E, we are cutting our revenue estimates to -2.2%/3.9% YoY CC (vs 2.6%/4.7% earlier).

Outlook

On the margins front, previously the company adopted a calibrated approach and improve on margins from a low base, which can be replicated going forward, hence we are slightly tweaking the marginal needle down to 14%/15% (vs 14.6%/15.3% earlier). With that our EPS (DET business) for FY26E/FY27E is seeing a cut of 11.0%/9.5%, respectively. Downgrade to HOLD (BUY earlier).