Cyient reported strong Q2FY18 with USD revenues increasing by 6.7% q-o-q (I-Sec: 6.2% q-o-q) and EBITDA margin expanding 180bps q-o-q to 14.6% (I-Sec: +70bps q-o-q). However, growth in services was somewhat weaker at 2.5 % q-o-q in CC terms with cross currency being a larger benefit of 160bps q-o-q to overall revenues. Also, despite the margin beat in Q2FY18, management expects full-year EBITDA margin to still expand by just 50bps y-o-y to 13.9 %, indicating the one-off nature of some cost control measures (e.g., S&M should trend back from 6.1% of revenues in Q2FY18 to a range of 6.5-7%). Order intake was muted for the second consecutive quarter with book-to-bill ratio in services being just 0.8x in Q2FY18 and 1.01x in Q1FY18. However, management remains confident of an uptick in H2FY18 with order intake in FY18 likely to increase by 10% on a y-o-y basis. Broadbasing of growth within services to non-top 10 clients is encouraging with revenues at non-top 10 clients having increased by 8.1% and 3.8% q-o-q in Q1FY18 and Q2FY18 respectively. Maintain Add.
Revenue growth helped by cross currency; services execution a tad lower than expected. Revenues increased by 5.1 % q-o-q on a constant currency basis and 6.7% in USD terms. Services revenues grew 4.2 % q-o-q in USD terms though growth in CC terms of 2.5% q-o-q was somewhat weaker than expectations. Growth was offshore- led for the second consecutive quarter with offshore services revenues increasing by 6.3 % q-o-q in Q2FY18 and 6.2% in Q1FY18. Design Led Manufacturing (DLM) revenues grew 34% q-o-q to $ 15.8million. Transportation revenues (USD terms) increased by 11.8% q-o-q in Q2FY18, which was on top of 11.7 % growth in Q1FY18. Communication revenues also remained strong, posting q-o-q growth of 6.5% in Q2FY18, which was on top of 9.9% q-o-q increase in Q1FY18. Aerospace & Defence revenues increased by 2.9% q-o-q with management expecting the momentum to sustain in the segment in the medium term given strong traction outside of the UTC portfolio. Encouragingly, revenue growth was broad-base across client buckets with the top 5, top 6-10 and non-top 10 clients posting growth of 5.8 %, 1.2 % and 3.8 % q-o-q, respectively.