Cyient Q1 Results Review - Stable Demand, Strong Margin Performance To Drive FY24: Motilal Oswal

Motilal Oswal Report

Cyient Ltd. reported Q1 FY24 service business (reclassified as digital engineering and technology) revenue growth of 0.3% QoQ in constant currency.

Excluding the business shifted from DLM, it declined 0.2% QoQ CC, marginally below our estimate of 0.3% QoQ CC. Q1 growth was led by the sustainability vertical (up 4.5% QoQ CC), followed by transportation (3.2% QoQ CC).

Growth was weak in connectivity (down 2.4% QoQ CC) and new growth areas (-6.5% QoQ CC). Normalized Ebit margin for the DET business came in at 16.1%, 60 bp above our estimates, mainly led by the cost rationalization measures and efficiency gain in Q1 despite the impact from an adverse business mix during the quarter.

Service order intake was modest at $193.2 million, down 12.2% QoQ/up 32.5% YoY in Q1.

However, the deal pipeline remained strong, with six large deals signed in Q1.

Cyient has reiterated its confidence of delivering service FY24 revenue growth of 15-20% YoY CC, but has increased DET Ebit margin growth forecast to 150-250 bp YoY.

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