Employees work at computers. (Photographer: Dhiraj Singh/Bloomberg)

Cyient Forecasts Tepid Revenue Growth For Fourth Quarter

Cyient Ltd. expects tepid sequential revenue growth in the quarter ended March 2019.

The engineering and information technology firm, in an exchange filing, attributed the trend to deferment of orders in its services business from key customers in aerospace and defence and communications segments.

The company said that delays in a large order, valued around $5 million, to its design-led manufacturing business will result in a material decline in the segment’s business, which contributes 12 percent to the company’s revenue. Delays in regulatory approvals from the client’s end, according to the company, were holding up the order.

Hyderabad-based Cyient said that it expects its services business—which contributes 88 percent to its consolidated revenue—to grow 1-2 percent over the last quarter. That compares with the company’s earlier growth projection of 5-6 percent, according to Morgan Stanley, and Kotak Institutional Equities’ 2.4-2.6 percent growth forecast for mid-cap information technology companies.

The management expects operating margin for the quarter to remain unaffected and maintained its full-year margin outlook.

The company’s margin expectations imply sequential improvement, Morgan Stanley said in a research note, adding that it expects them to recover in the first quarter of financial year 2019-20.

Analyst’s Take

Morgan Stanley said it’s ‘Overweight’ on the company’s stock while keeping its target price unchanged at Rs 720 per share. It lowered the firm’s FY20 and FY21 revenue and earnings per share forecasts. IDBI Capital downgraded the stock to ‘Accumulate’ from ‘Buy’ with its target cut to Rs 687 from Rs 769 apiece earlier.

Shares of Cyient have declined around 7 percent so far this year compared with the Nifty IT Index’s 10 percent gain. The shares have fallen nearly 16 percent over the past 12 months.

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