Cyient slumps as FY24 revenue growth seen at lower end of guidance, but brokerages remain bullish

Brokerages remain bullish on Cyient's growth prospects. HSBC has a Buy call on the stock with a target of Rs 2,294 per share

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Cyient on October 20 fell over 3 percent after the tech company's management said that its DET (digital, engineering and technology) revenue growth is likely to be at the lower end of 15 – 20 percent range this fiscal. At 11 am, the Cyient stock was quoting at Rs 1,713.95 on the NSE, down 2.8 percent from previous close. Trading volumes at the time were close to 3 lakh shares.

Speaking to CNBC-TV18, Krishna Bodanapu, executive vice chairman and managing Directod, Cyient said, "Company is guiding for revenue at lower end of guidance due to softness in communication sector. This quarter is the bottom for the communication vertical. We don’t expect communication vertical to see significant growth in Q3, but it won't slide."

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However, the management commentary remains positive on aerospace and automotive business. "Aerospace revenue was up more than 20 percent YoY. We hope to see meaningful acceleration in this segment in next 6-12 months," Bodanapu said.

Brokerage view

Meanwhile, brokerages remain bullish on the company's growth prospects. HSBC has a Buy call on the stock with a target of Rs 2,294 per share. This recommendation is supported by Cyient's revenue growth meeting the firm's HSBC' analysts estimates.

"The company's prospects in aerospace and sustainability sectors look promising. It is also actively de-risking its revenue profile and benefits from industry tailwinds in key verticals, which should drive medium-term resilience," said HSBC.

For the quarter ended September, Cyient's consolidated net profit saw a rise of 132.11 percent to Rs 183.6 crore, compared to Rs 79.1 crore in the year-ago period. Its revenue from operations came in at Rs 1,778.5 crore, growing 27.38 percent YoY.

According to Motilal Oswal Financial Services, Cyient's service segment is shaping up quite well, with positive momentum in most of its growth engines.

"Conversely, other segments are on the verge of recovery and should incrementally contribute to its overall growth in FY24E," the domestic broking firm noted, with a Buy call on the stock and target price of Rs 1,980.

However, Nuvama Institutional Equities is a bit wary of the 15-20 percent growth guidance. "This would require 3.3 percent CAGR in next two quarters – which appears a tall ask," it noted. Given the run up in stock price, over 57 percent in the past six months, the brokerage has a Hold rating on the stock with a target of Rs 1,920.