Cyient share price jumped over 8 per cent intraday on Friday after the company recorded 17 per cent growth in profit at Rs 154.20 crore for the quarter ended March 2022 from Rs 131.8 crore in the quarter ended December 2021. The board has declared a final dividend of Rs 14 (i.e. 280%) per share on face value of Rs 5 per share for the financial year 2021-22. Brokerages remain bullish on the stock and see up to 34% potential rally, going forward. “We continue to see a strong rebound in ER&D spending, led by increased outsourcing and larger deal sizes. The management’s strategy to leverage these spends, led by a refreshed GTM strategy and increased focus on large deal wins, should bode well for its growth performance,” said Motilal Oswal in a note.
Stock talk: Should you buy, hold or sell
Motilal Oswal: Buy
Target price: Rs 1,000; Upside: 20%
The domestic brokerage firm believes that the growth momentum in verticals such as Communications, Utilities, Medical Devices, Semiconductor, Automotive, and Mining is expected to continue for the next two-to-three years. Additionally, aerospace is expected to bounce back to pre-COVID levels in FY23. “Although near-term growth may be soft, a better margin will compensate for the growth. We expect 11% PAT CAGR over FY22-24,” it said. Motilal Oswal maintains buy rating on attractive valuations with a target price of Rs 1,000 per share, implying an upside of 20%.
ICICI Securities: BUY
Target price: Rs 1,025; Upside: 24%
Analysts at ICICI Securities believe the drag on the overall performance on account of semiconductor issue in the DLM business should be offset by an outperformance in the services segment. “Post management, strategy change, improved performance in the company is noteworthy and continued execution of the same should make Cyient a good turnaround story. Management’s confidence to sustain an elevated level of margin in services segment is a key positive given supply-side cost pressures,” it said.
The brokerage upgraded the stock to BUY from ADD as the stock has fallen 12% in the last one month and the risk-reward ratio looks very attractive. The target price has been revised upwards to Rs1,037 from Rs 1,025 earlier. Cyient remains ICICI Securities’ only pick in the ER&D sector as valuations are highly reasonable.
HDFC Securities: Buy
Target price: Rs 1,120; Upside: 34%
Cyient reported a soft quarter as revenue was down 0.4% on-quarter due to a soft DLM segment. The services segment growth was also muted, given the decline in rail transportation. The aerospace vertical was flat. However, as per the brokerage firm, the worst phase of commercial aerospace is over and growth will be led by avionics and MRO activity.
“The services guidance is baking in recovery in aerospace and transportation (revival in H2) and continued growth in communications. The TCV, at USD 135mn, was up 48% YoY, citing growth uptick. The margin challenges will continue and onsite wage inflation is a bigger challenge,” said HDFC Securities in its note. It maintains Buy call on the stock with a target price of Rs 1,120.
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