Hold Cyient; target of Rs 720: ICICI Direct

ICICI Direct's research report on Cyient

US$ revenues grew 5% QoQ to $168.9 million, in-line with our $169.2 million and 5.2% QoQ growth estimate. Revenues in constant currency grew 6.5% sequentially Revenues in rupees grew 9.9% QoQ to Rs 1,187 crore EBITDA margins expanded by 150 bps QoQ to 13.7% and were way above our 70 bps expansion and 12.9% estimate. Margin expansion was mainly due to rupee depreciation (+80 bps), utilisation & offshore mix (+130 bps), SG&A absorption (+100 bps) offset by partial wage hike (-100 bps impact) Reported PAT of Rs 127.1 crore was above our Rs 95.2 crore estimate on account of better than expected operating performance and higher other income (Rs 56.8 crore vs Rs 17 crore in Q1FY19). Other income was higher due to benefits from incentives (Rs 23.4 crore) and unrealized restatement gain (Rs 20.7 crore).

Outlook

Although growth was broad based across verticals, improving growth in aerospace vertical and margin trajectory has to be watched out for. Hence, we maintain HOLD recommendation with target price at Rs 720 (~16x FY20E EPS).

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