Cyient shares zoom 9% post Q4 earnings; should you buy, sell or hold?

Shares of Cyient zoomed over 9 per cent to hit an intraday high of Rs 904 on BSE after the company announced its March quarter earnings.

The company posted a net profit of Rs 154.20 crore for the quarter ended March 2022, up 17 per cent from Rs 131.8 crore in the quarter ended December 2021. Revenue came in at Rs 1,181.20 crore against Rs 1183.4 crore sequentially.

The stock opened higher at Rs 845 against the previous close of Rs 831.15. With a market capitalisation of more than Rs 9,700 crore, the shares stand higher than 5 day moving averages but lower than 20 day, 50 day, 100 day and 200 day moving averages.

"We view the impact on the DLM business due to the global semiconductor shortage as a negative, given the hit on near term growth. The Rail business will continue to be a drag on revenue in 1HFY23. Nonetheless, the continued outperformance in the larger Services business should more than compensate
for any impact on earnings," said Motilal Oswal in its recent report.

"We continue to see increasing spends in the ER&D industry and view CYL’s strategy to digest these spends as supportive in the near to medium term. We lower our FY23/FY24 EPS estimate by 5/6 per cent on account of slower growth in DLM. Although near-term growth remains a concern. We maintain our Buy rating on attractive valuations. Our target multiple of 17x FY24 EPS implies a target price of Rs 1,000," the brokerage house added.

Axis Securities believes Cyient has built a strong and resilient business, supported by multiple long-term contracts with the world’s leading brands. With depreciation in INR, lower travel cost, and lower on-site expenses, the company’s EBITDA margins are likely to expand in the near term.

"Against this backdrop, We recommend a BUY on the stock and assign a 17x P/E multiple to the company’s FY24E earnings of Rs 60.0/share to arrive at the TP of Rs 1,000/share," the brokerage firm added.

ICICI Securities noted that Cyient currently trades at 17/14x FY23/24E P/E, PEG of ~1x vs the ER&D sector trading at 40x FY24E for FY22-FY24E EPS CAGR of 20 per cent and PEG ratio of 2x.

"We upgrade the stock to BUY from ADD as the stock has fallen 12 per cent in the last one month and the risk-reward ratio looks very attractive to us at just 14x PE on FY24 EPS of Rs58. We value the stock at 18x target PE multiple (unchanged) to arrive at a revised target price of Rs 1,037 (prior: Rs1,025). Cyient remains our only pick in the ER&D sector as valuations are highly reasonable," it added.