HDFC Securities' research report on Cyient
Cyient reported a strong quarter with better-than-expected organic growth in the services segment (+3.2% QoQ CC), continued margin expansion and impressive guidance for FY24E. The services growth was driven by the aerospace and automotive verticals, offset by weakness in communications and medical. The company is set to change gears with double-digit growth in services, led by (1) investments in new growth areas (EV and mobility), (2) strong growth in aerospace led by MRO, upgrades and defence spending, (3) five large deal wins with best TCV of USD 185mn, (4) strong order intake of USD 213mn (+13% YoY), (5) recovery in communication vertical, and (6) appointment of new CEO that drives confidence. The proposed listing of the DLM will lead to value unlocking of the manufacturing segment. For FY24E, the management expects double-digit growth in services (15-20% YoY CC growth at group level) and an EBIT margin of ~14-15% (expansion of ~100- 200bps). We increase our FY24/25E EPS estimate by ~6%, led by improving growth visibility.
Outlook
We maintain our BUY rating with a target price of INR 1,310 based on 18x Dec-24E EPS (earlier 16x). The stock is trading at 17/15x FY24/25E, a steep discount of ~40% to LTTS.
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