ICICI Direct recommended hold rating on Cyient with a target price of Rs 475 in its research report dated July 19, 2019.
ICICI Direct's research report on Cyient
Cyient’s results were below our estimates on all fronts. Dollar revenues declined 5.2% QoQ while EBITDA margins contracted 180 bps QoQ to 13.3%. Further, the overall order book (including DLM) declined 20.9% QoQ with Cyient service order book declining 27.6% QoQ. Issues in top 20 clients and inferior execution were the primary reasons for the lacklustre performance. Taking this into account and limited visibility (till Q2FY20E), the management has refrained from giving guidance for the year.
Outlook
Client specific issues and those under execution have led to a major let down on revenue performance in the last two consecutive quarters. Further, led by a decline in order book along with limited visibility for the year, we cut down our revenue estimates. However, taking into account possible revenue and margin recovery in FY21E, we maintain HOLD rating on the stock with a revised target price of Rs 475/share (11x FY21E EPS).
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