Buy Cyient, target price Rs 966: ICICI Direct

ICICI Direct has buy call on Cyient with a target price of Rs 966. The current market price of Cyient Ltd. is Rs 749.2.
Time period given by analyst is one year when Cyient Ltd. price can reach defined target.

Cyient Ltd., incorporated in the year 1991, is a Mid Cap company (having a market cap of Rs 8277.65 Crore) operating in IT Software sector.


Cyient Ltd. key Products/Revenue Segments include Software Development Charges for the year ending 31-Mar-2022.


Financials
For the quarter ended 30-09-2022, the company reported a Consolidated Total Income of Rs 1415.90 Crore, up 10.29 % from last quarter Total Income of Rs 1283.80 Crore and up 25.69 % from last year same quarter Total Income of Rs 1126.50 Crore. Company reported net profit after tax of Rs 79.10 Crore in latest quarter.

Investment Rationale
The brokerage now values Cyient at 15x (prior: 14x) to arrive at a revised TP of Rs966 (prior: Rs869) and upgrade the stock to Buy (prior: ADD) as it believes that 1) revenue growth is expected to pick up across core verticals from Q3FY23, 2) margins have bottomed out and are expected to increase from here on plus all acquisitions are margin accretive, 3) partial divestment of DLM business will likely improve capital allocation and management bandwidth towards Cyient’s core services business. Cyient is down 28% YTD and is now trading at very attractive valuations of 12x on FY24E P/E (56-80% discount to Indian ER&D peers). Upgrade to BUY.

Promoter/FII Holdings
Promoters held 23.4 per cent stake in the company as of 30-Jun-2022, while FIIs owned 34.04 per cent, DIIs 22.52 per cent.