Seeing progress on the order book and large deals– Cyient

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.1% lower at 13,818. Within NIFTY50, AXISBANK (+5.5%), SBIN(+2.6%), and IOC (+1.6%) were the top gainers, while HINDUNILVR (-3.7%), MARUTI(-3.4%), and WIPRO (-3.0%) were the top losing stocks. Among the sectoral indices, BANK (+6.0%), and PRIVATE BANK (+0.2%)were the only gainerswhileREALTY (-2.2%), IT (-2.2%), and FMCG (-1.9%) were the top losing sectors.

Seeing progress on the order book and large deals– Cyient

Excerpts of an interview with Mr. Karthikeyan Natarajan, President & COO, Cyient, aired on CNBC-TV18 on 28thJanuary 2021:

• After a dip in performance in 1QFY21, Cyient is seeing a steady sequential recovery. Revenue growth and margins improved in 2QFY21 and further in 3QFY21 as well. Management expects further improvement in 4QFY21.
• Cyient management has been able to bring in operating efficiency on the back of off shoring, utilizations, improving their pyramid structure, and through automation.
• Cyient is making steady progress on digital transformation and expect that to accelerate in FY22E.
• Management expects a revenue decline of ~10% in FY21E.
• Cyient saw softness in aerospace & defense and few other verticals in the period between 1QFY20 to 1QFY21. Cyient restructured about 3 months ago and is now focusing more on good markets which should put them in a much better shape.
• Cyient saw some one-off supply chain issues in the medical technology and healthcare business which led to 10% decline on a QoQ basis in that segment. But management expects the YoY growth momentum in this segment to remain strong.
• Order book in 3QFY21 also included some impact of pent up demand. Management is seeing progress in order intake and has closed about 5 large deals worth USD 106 mn.
• Within aerospace segment, Defense continues to be strong. Commercial aerospace remains soft but management hopes to stabilize to 3QFY21 levels in the near term. The next level of growth in aerospace segment will come post the vaccination drive over next 6-9 months.

Consensus Estimate (Source: market screener website)

• The closing price of CYIENTwas ₹ 625as of 28-January-2021. It traded at 19x/ 16x/ 14x the consensus EPS estimate of ₹33.4/39.5/45.8 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 621/- implies a PE multiple of 14x on FY23E EPS of ₹45.8/-.

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