Buy Cyient DLM; target of Rs 810: Motilal Oswal

Motilal Oswal's research report on Cyient DLM

CyientDL is a well-integrated EMS solution provider, deriving majority of its revenue (69% in 9MFY24) from the high-margin and critical end-user industry of Aerospace and Defence (A&D). The global A&D space is poised to grow at a healthy pace (5.9% CAGR over CY22- 26), led by technological advancements, rising defence spending, and the emergence of new markets such as space exploration. This is, in turn, translating into higher growth for the A&D EMS industry, led by the growing trend of outsourcing, which provides cost savings and access to advanced technologies. CyientDL is better placed to grab the growing EMS opportunity in this space, leveraging its strong client relation and multi-decade experience in the A&D sector (both domestic and exports). The India defence sector is under prime focus with defence spending rising steadily, hitting INR6.22t in FY24B, up 4.7% from FY23A. The government targets USD25b in defence manufacturing by CY25, including USD5b from exports. Initiatives such as the Defence Offset Policy are geared toward reducing reliance on foreign arms imports. As of Mar’22, a total of 57 contracts have been signed under this policy, amounting to USD13.5b.

Outlook

We estimate CyientDL to report a CAGR of 39%/42%/79% in revenue/EBITDA/ Adj. PAT over FY23-26 We reiterate our BUY rating on the stock with a TP of INR810 (35x FY26 EPS).

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Cyient DLM - 09042024 - moti