Broker’s Call: Cyient (Buy)

IDBI Capital

Target: INR 1,265

CMP: INR 1,159.40

sient I mentioned strong Organic growth in service revenue In the fourth quarter of fiscal year 23 led by vertical transportation.

Going forward, the company has led services revenue growth of 15-20% and margins improved by 100-200 basis points. We were conservative on revenue growth of 17% due to overall uncertainty and potential delays in revenue conversion.

Growth in revenue is expected to be driven by strong double-digit growth in aviation, communications and inorganic shareholding. We expect services revenue to grow at a compound annual growth rate of 13.3 percent over fiscal years 23-23 and 25. This growth is expected to be driven by double-digit growth in the aviation, communications and sustainability segments.

Further, we expanded our minimum margin by 100 basis points to improve services margins on a normal basis up 136 basis points quarter over quarter driven by higher pricing and volume impact.

However, we did a 100 basis point improvement in EBIT margins for FY24 to 13.7% in FY24 and then a further improvement of 30 basis points to 14% in FY25 driven by higher utilization and hierarchy and automation.

Despite this conservative assumption, our EPS was upgraded by 5% in fiscal ’25E. Hence, we maintain a Buy rating on the stock with an adjusted price target of €1,265 (17 x FY25E EPS).