Shares of Cyient DLM came under pressure after the company reported a weaker-than-expected performance for the December quarter. Kotak has cut its FY2026-28 earnings estimates by 13% to 14% and reduced the fair value to Rs 385 from Rs 460 earlier. The brokerage also retained its 'Reduce' rating as it rolled forward its valuation to December 2027, citing near-term execution risks despite pockets of improvement in the order book.
Cyient DLM's adjusted profit after tax for Q3FY26 came in at Rs 138 million, around 23% below Kotak's expectations, primarily due to weak execution. Consolidated revenue declined 32% year-on-year to Rs 3.0 billion, missing estimates by 18%, as the company grappled with a soft opening order book and tariff-related headwinds in the US market.
Operating profitability was largely in line with expectations, with EBITDA at 9.1% and adjusted EBITDA margin at 10.2%, excluding one-off expenses and employee-related costs. However, muted execution and lower-than-expected order inflows continued to weigh on overall performance.
Order Inflow Improves
Order inflows showed some sequential improvement, rising to Rs 3.9 billion, up 18% quarter-on-quarter. This was largely driven by new client additions, including two global logos-one each in the medical and industrial segments. Despite this, Kotak noted that inflows remained above the 1x book-to-bill ratio, enabling a marginal improvement in the order book to Rs 23 billion.
The brokerage highlighted that management is targeting growth in FY2027 on the back of a strong order book and improved execution ramp-up. However, it cautioned that sustained order inflows remain critical, especially as recent inflows carry higher margin profiles that are expected to support profitability over the medium term.
Tariff Impact on US Business
US tariffs have begun to affect the company's revenues, with several American clients reportedly deferring purchases. To mitigate the impact, Cyient DLM has created multiple operational options for customers and is expected to rely more heavily on its existing US facility in Connecticut through Altek.
While tariffs have already affected order inflows and execution, Kotak said there has been no meaningful impact on profitability so far. However, it flagged the situation as a key monitorable going forward, especially for export-led growth recovery.
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