Prabhudas Lilladher is bullish on Cyient has recommended buy rating on the stock with a target price of Rs 860 in its research report dated July 13, 2018.
Prabhudas Lilladher's research report on Cyient
Cyient delivered a weak set of performance for 1QFY19 with a tepid margin performance. Lower EBIDTA margins, lower other income (vs our estimates) and higher tax rate (vs our estimates) led to PAT miss our estimation by 25% for the quarter. Revenues came at USD160.8mn were down 2.3% QoQ and in line with our estimates (Ple: USD161mn). Services business revenues at USD143mn were up 0.1% QoQ in USD (1.1% QoQ growth in constant currency). ANSEM acquisition contributed to USD1.6mn for the quarter. Hence, organic revenues of services business declined by 1% QoQ in USD and were flat in constant currency. Softness in Utilities vertical (down 12.5% QoQ and 5.5% YoY) as well as Communication vertical (down 3.5% QoQ) weighed on Services business performance for the quarter. Design Led Manufacturing (DLM) business revenues for the quarter came at USD18mn (compared to USD22mn in 4QFY18) owing to seasonality. EBIDTA margin came at 12.2% down 190bps QoQ and 60bps YoY and below our estimates (PLe:13.5%). Services business EBIDTA margin came at 13.2% for the quarter down 220bps QoQ. DLM business EBIDTA margins stood at 4.6% for 1QFY19 down.
Outlook
We downgrade our TP by 2% to Rs 860/share (18x FY20E EPS) led by modest EPS downgrade. Retain Buy. We have recently initiated coverage on Cyient.
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