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Cyient DLM expects better orders from this financial year; Stock rallies as much as 15%
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Cyient’s order book stood at ₹2,170 crore as of the fourth quarter, down 5% sequentially and 11% YoY. The muted order book for the reported quarter was due to lumpiness in the order book conversion, which is expected to be converted in FY25, Motilal said.
Shares of Cyient DLM Ltd. were trading with gains of as much as 15% on Wednesday. The company reported robust earnings for the fourth quarter of financial year 2024, with revenue rising 30% year-on-year (YoY), fueled by significant traction from the Defense and Aerospace verticals.
However, EBITDA margin contracted by 100 basis points YoY to 10.5%, primarily due to the increase in selling, general, and administrative (SG&A) expenses.
Cyient’s order book stood at ₹2,170 crore as of the March 2024 quarter, down 5% sequentially and 11% YoY. The muted order book for the quarter under review was due to lumpiness in the order book conversion, which is expected to be converted in FY25.
According to Motilal Oswal analysts, being an integrated EMS and solutions provider in the rapidly growing critical end-user industries, Cyient DLM is expected to capture its share of the pie, aided by its strong core competencies and high technical capabilities.
Going forward, the brokerage expects the company to sustain its growth momentum, supported by a strong order book coupled with healthy order inflows; high customer stickiness; and a strong promoter heritage.
Motilal estimates Cyient to report a revenue, EBITDA, and adjusted profit after tax CAGR of 33%, 49%, and 68%, respectively, over FY24 to FY26.
The broking firm has reiterated a ‘Buy’ recommendation on the stock with a target price of ₹840 per share.
Meanwhile, Kotak Institutional Equities have retained its ‘Sell’ rating on the stock, citing the company’s declining order book trend for the seventh straight quarter. Its order inflows were down 55% in FY2024, providing limited growth visibility beyond FY2025, the brokerage said.
“We fine-tune our estimates by 0.3-1.9% and retain our ‘Sell’ rating, with an unchanged fair value of ₹570,” it said, adding that a weakening margin profile, deteriorating working capital cycle and limited growth prospects due to niche focus keeps it cautious.
In an interaction with CNBC-TV18, Shrinivas Kulkarni of Cyient DLM said, “The fourth quarter was a good quarter, FY24 full-year growth as per expectations. Margin will improve in FY25 due to better absorption. Expect large pipeline to get converted in FY25.”
Shares of Cyient DLM Ltd. were trading 7% higher at ₹734.55 apiece on the NSE.
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