Cyient DLM To Maintain Strong Profit Growth Over Next Two Years, Says Motilal Oswal; Shares Surge

The growth momentum in Cyient DLM Ltd.'s profit is likely to sustain over the next two years, supported by a strong order book, according to Motilal Oswal Financial Services Ltd., which has retained its 'buy' rating on the stock. The brokerage has set a target price of Rs 840 apiece, implying an upside of 22.43% from Tuesday's closing price.

A strong order book with healthy order flows, customer stickiness, and a strong promoter heritage are likely to help the company keep its positive growth momentum moving forward, Motilal Oswal said in a note on Tuesday.

Cyient DLM is also expecting an order win in the first quarter of FY25, Motilal Oswal said.

"We anticipate, in three-year CAGR term, average of 30% year-on-year growth," Cyient DLM Chief Executive Officer Anthony Montalbano said in a televised interview with NDTV Profit.

The brokerage expects Cyient DLM to achieve a 68% CAGR-adjusted net profit over FY24–FY26.

Cyient DLM, an integrated electronics manufacturing services and solutions provider in rapidly growing critical industries, is likely to capture its share of the pie, aided by its core competencies and high technical capabilities, Motilal Oswal said.

In the January-March period, Cyient DLM reported 30% annualised growth in its revenue from traction in the aerospace and defence verticals, Motilal Oswal said. However, industrial sales declined.

"This is a quarter, in core competencies we excelled. We have had a higher percentage in medical in prior years, we see that shifting where we expect medical and industrial segment to gain larger share," Montalbano said

The company witnessed an Ebitda margin contraction due to an increase in employee expenses, the brokerage said.

• Motilal Oswal reiterated 'buy' with a target price of Rs 840 apiece, which implied an upside of 22% from Tuesday's close.

• Strong revenue growth is seen, jumping 30% on an annualised basis, with traction in defence and aerospace.

• Ebitda was down 100 bps. The fall is primarily due to an increase in SG&A expenses, the brokerage said.

• The order book is at Rs 2,170 crore as of 4QFY24, down 11% YoY.

• Management is targeting a 30% revenue CAGR over the next 3 years.

• Improving the margin trajectory and return ratio target of 15% in 2 years

• Expect growth momentum, supported by:

  1) a strong order book coupled with healthy order inflows;

  2) high customer stickiness;

  3) a strong promoter heritage

• Revenue/Ebitda/Adjusted PAT CAGR of 33%/49%/68% over FY24-26

• Revenue up 30.42% at Rs 362 crore. (Bloomberg estimate 361 crore).

• Ebitda up 18.96% at Rs 38.01 crore. (Bloomberg estimate Rs 37.2 crore).

• Margin down 101 bps at 10.5%. (Bloomberg estimate Rs 10.3%).

• Net profit up 80.5% at Rs 22.74 crore. (Bloomberg estimate: Rs 23.85 crore).
  
  

Shares of the company rose as much as 13.26% to Rs 780.00 apiece, the highest level since March 7. It pared gains to trade 5.81% higher at Rs 726.40 apiece as of 10:00 a.m. This compares to a 0.34% advance in the NSE Nifty 50.

The stock has risen 72.71% in last 12 months. Total traded volume so far in the day stood at 79 times its 30-day average. The relative strength index was at 57.22.

Out of six analysts tracking the company, five maintain a 'buy' rating and one suggests a 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 14.6%