Prabhudas Lilladher recommended accumulate rating on Cyient with a target price of Rs 621 in its research report dated May 13, 2019.
Prabhudas Lilladher's research report on Cyient
We attended Cyient analyst meet where management guided its strategy to transform from Pure play services company to solution provider with focus on providing integrated solution services across value chain of clients. Cyient guided global engineering services outsourcing market consist of addressable size of USD 93bn and is projected to grow at a CAGR of 6% with new trend of Innovative Centric / IP based solutions against earlier manpower based engineering services with shift of commercial model from Fixed cost/ T&M to Risk/ reward pricing. Management believes that its ability to address end to end value chain through its enhanced capabilities will be the key differentiator and help the company scaling in this new evolving environment. Cyient has missed either revenue guidance or margin guidance over past 4-5 years. Cyient's margin trajectory has remained weak and is likely to remain at the lower end among mid-sized IT peers. Cyient expects services business to grow in high single digit (cc terms) and 15% YoY growth in DLM. We expect Cyient to deliver 8.1% USD revenue growth for FY20E (7.3% growth in Services business and 14% growth in DLM business).
Outlook
We remain watchful on margin trajectory & expect margins to remain flat inFY20E-21E. We value Cyient at 13x FY21E EPS & arrive at an unchanged target price of Rs.621. Maintain Accumulate.
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