Accumulate Cyient; target of Rs 1310: Prabhudas Lilladher

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Strong order intake: Cyient's order intake came in at a Q2 record high of USD 158.4mn, up 20.8% YoY, driven by healthy traction in data, AI, and digital engineering.
  • Margin expansion: The company's EBIT margin expanded ~100 bps QoQ to 14.2%, beating estimates, driven by cost optimization initiatives and TAO Digital's contribution.
  • Growing recurring revenue: Management expects the contribution of recurring revenue to increase, with a target of 70% of DET revenues coming from sticky, long-term annuity revenue.
  • Strategic initiatives: Cyient is evolving its technology organization through the creation of a CTO office, focusing on research and development in Horizon 2 and Horizon 3 technologies.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for:

  • Continued strong order intake and growth in recurring revenue,
  • Margin expansion driven by cost optimization initiatives,
  • Successful integration of TAO Digital and its contribution to revenue and margins,
  • Progress in Cyient's strategic initiatives, such as the creation of a CTO office and focus on emerging technologies. These signals will indicate whether the company is on track to achieve its growth and margin expansion targets, and whether the investment thesis is playing out as expected.