Prabhudas Lilladher's research report on Cyient
Cyient reported strong beat in revenue growth (+6% QoQ USD) led by strong demand momentum in DLM (+16.4% QoQ USD) and broad-based recovery in Services (+3.7% QoQ USD). They also reported robust 4QFY21 order book of $238Mn, +22.4% QoQ and sustained strong large deal wins with TCV potential of $91 Mn. As guided by the management, we believe that Cyient will report strong double digit growth in revenue in FY22 led by ramp up of deals won in FY21 and broad-based deal pipeline. They anticipate DLM to post robust growth of 20% YoY CC in FY22. Consolidated EBIT margin was at 8 quarter high at 12.6%, +148 bps QoQ in 4QFY21. Management guided that margins are expected to improve by 200 bps YoY in FY22 as headwinds of wage hike will be offset by automation, improvement in SG&A efficiency and niche digital capabilities to support pricing. Management has factored the potential supply side issues such as sharp increase in attrition (+800 bps QoQ in 4Q) in their guidance and will address these issues by appropriate wage hikes. Normal wage hike rollout for FY22 in 1HFY22 also indicates management’s positive demand outlook.
Outlook
We arrive at a TP of INR 825 (earlier INR 683) on FY23 EPS of INR 51.5. Cyient is currently trading at 15.6X/13.4X on FY22/23 earnings of INR 44.2/51.5 respectively. Maintain BUY.
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