Result Update: Cyient Ltd - ACCUMULATE - TP Rs.576 - Kotak

Cyient's USD revenue grew by 6.6% QoQ to USD150mn in 2QFY18 vs our estimate of USD 146.2mn.Core service business grew by 4% QoQ after 3.1%. The growth was further supported by DLM business which grew by 33.5% to USD15.8mn vs our estimate of USD14.55mn. However, some near term headwinds being faced by Cyient largest Client UTC owing to work load rebalancing can be a matter of concern. EBIDTA margins improved by 180bps to 14.6% despite wage hike, which was offset by better SG&A cost management, and improvement in gross margins due to higher offshoring, better onsite margins and increased utilisation. Strong growth was reported across verticals except Utilities. Our revised earnings estimate stand at Rs.37.8 and Rs.44.3 for FY18 and FY 19 respectively. We believe Cyient's performance in FY18 (US$ growth of 11.8% and margin +60bps yoy) will be better than that of its peers, and execution of its strategy of design plus manufacturing should be reflected in financials from FY19e onwards. We believe consistently meeting its outlook will be key for further rerating. We upgrade to ACCUMULATE from REDUCE earlier with a revised target price of Rs.576 (earlier Rs.521).

Shares of Cyient Limited was last trading in BSE at Rs.539.4 as compared to the previous close of Rs. 522.6. The total number of shares traded during the day was 2788696 in over 9505 trades.

The stock hit an intraday high of Rs. 568.8 and intraday low of 520. The net turnover during the day was Rs. 1458021135.

Source : Equity Bulls

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