Cyient - Result Update - BUY- Soft as Expected, Order Book Healthy - Reliance Securities

On expected lines, Cyient posted a soft performance in 3QFY17, with revenue at US$135.8mn (-0.5% qoq; +0.6% in CC terms). Implied volumes declined 0.5% qoq, while pricing declined 1.1% qoq. An adverse cross-currency impact of 110bps was also witnessed. A positive factor was healthy growth in Design-Led Manufacturing (DLM) segment (10.2% qoq rise in USD revenue). EBITDA margin declined 66bps qoq on soft revenue. Another key positive was strong up-tick in order book. With 3Q being the key quarter for order intake, a healthy 292% qoq rise in Cyient Services order book executable beyond FY17E and 105% qoq rise in DLM order book beyond FY17E are other major positives, which set a strong base for FY18. In yoy terms, order book increased in excess of 10%. The outlook remains strong backed by positive trends in key segments including Aerospace, Medical & Utilities.

Order Book Metrics - Setting a Strong Base for FY18

Despite a seasonally soft quarter with revenue declined by 0.5% qoq (+0.6% in CC terms), strong order book growth is one of the key positives. 3Q is typically the strongest quarter from an order intake perspective, as major clients across verticals issue purchase orders for next year during this quarter. Order book in Cyient Services & DLM segment grew by 292% qoq & 105% qoq, respectively for orders beyond FY17E, key positives, which in our view set a strong base for FY18E. We believe underlying order book metrics will enable Cyient to comfortably achieve our USD revenue growth estimates of 14.2% yoy for FY18E.

Outlook & Valuation

At CMP, the stock trades at a PE of 12.4x/10.5x FY18E/FY19E EPS, which we believe is reasonable owing to improving growth in core business metrics, strong long-term client relationships, decent dividend yield, quality balance sheet and healthy EPS (18.3% CAGR) over FY16-FY18E. We are enthused by Cyient's strong order book growth and build-up of base for revenue growth in FY18E. We introduce FY19 numbers envisaging 14.4% USD revenue growth, 25bps expansion in EBITDA margin and EPS growth of 17.6%. We reiterate our BUY recommendation on the stock with an unrevised Target Price of Rs565.

Shares of Cyient LTD. was last trading in BSE at Rs.495.8 as compared to the previous close of Rs. 501.6. The total number of shares traded during the day was 3751 in over 231 trades.

The stock hit an intraday high of Rs. 508 and intraday low of 492.05. The net turnover during the day was Rs. 1870153.

Source : Equity Bulls

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