Hold Cyient; target of Rs 540: ICICI Direct

Cyient’s dollar revenues grew 9.5% QoQ to $136.5 million (our estimate: $127.3 million and 2.6% sequential growth) while constant currency (CC) revenues grew 10.3% QoQ Revenues in rupees grew 9.5% QoQ to Rs 913.6 crore above our 2.6% QoQ decline and Rs 852.2 crore estimate EBITDA margins increased 80 bps QoQ to 13.9% and were above our 12.8% estimate. Margin tailwinds from better revenue growth, operational efficiency were offset by a partial wage hike Reported PAT of Rs 97.2 crore was below our Rs 72.3 crore estimate on account of higher other income (Rs 19.7 crore vs. Rs10.6 crore) and better operating performance Cyient declared an interim dividend of Rs 3 per share.  

We have revised our EPS estimates marginally to factor in stellar Q2FY17 results and strong commentary regarding demand outlook. We anticipate Cyient will report rupee revenue, PAT CAGR of ~16% each in FY16-18E (average 13.9% EBITDA margins in FY17-18E), vs. 21%, 18.5% CAGR reported in FY11-16 (average EBITDA margins 16.3%). We continue to maintain our HOLD rating mainly on account of the company’s uneven growth and margin profile. We have revised our target price to Rs 540 (at 14x FY18E EPS).  For all recommendations, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.