Going ahead, we expect Cyient DLM's growth momentum to slow down in the near term due to the lack of BEL orders and a delay in order flows from existing and new clients. However, the integration of Altek, should drive healthy financial performance due to synergy benefits and industry tailwinds.
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Motilal Oswal Report
Cyient DLM Ltd.'s Q3 FY25 consolidated revenue/Ebitda grew by ~38%/23% YoY. However, Ebitda missed our estimates as margins declined 90bp YoY due to a high mix of low-margin business (Bharat Electronics Ltd. order execution). Standalone revenue (excluding Altek – recently acquired) grew only ~11% YoY in Q3 FY25.
The order book continued its downward trend, down 19% YoY/6% QoQ in Q3 to Rs 18.5 billion (consolidated order book at Rs 21.4 billion, including Altek order of Rs 2.9 billion).
Order book growth remains a key concern amid a delay in ordering from some clients; however, the conversion of orders from new clients added over the last few quarters and ongoing discussions with some large global potential customers can boost growth visibility.
We reduce our earnings estimates for FY25/FY26/FY27 by 14%/25%/26%, due to softness in order flows (lack of BEL orders), lower margins due to unfavorable operating leverage, and uncertainty about large order flows in the near term. We retain our Buy rating on the stock with a target price of Rs 700 (31 times FY27E EPS).
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