Hold Cyient; target of Rs 480: ICICIDirect

ICICIDirect's research report on CyientWe attended Cyient's full house, analyst day in Hyderabad wherein the company reflected on the issues that plagued FY16 growth and, at the same time, highlighted course correcting actions, which could help achieve industry leading and sustainable earning growth. That said, this journey (of becoming a solutions expert in chosen verticals) could be volatile from an earnings perspective and favours tactical allocation.We expect Cyient to report rupee revenue, PAT CAGR of 15%, 23% in FY16-18E (average 15.8% EBITDA margins in FY17-18E), vs. 21%, 18.5% reported in FY11-16 (average 16.3%), respectively, driven by acceleration in selected BUs and Rangsons contribution. Uneven growth, margin profile and weakness in Rangsons continue to dictate our HOLD rating. We value the stock at 11x FY18E EPS of | 44 to arrive at our | 480 target price. We believe Cyient could be a tactical bet in the near term while structural shift warrants commencement of offset contracts.

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