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ICICI Securities: Cyient’s Q1 Reports Stronger Than Expected Revenue Performance; Recovery Imminent

ICICI Securities: Cyient’s Q1 Reports Stronger Than Expected Revenue Performance; Recovery Imminent

A person working on a laptop. (Photographer: Wei Leng Tay/Bloomberg)
A person working on a laptop. (Photographer: Wei Leng Tay/Bloomberg)

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ICICI Securities Report

Cyient has reported a revenue decline of 11.6% QoQ in Q1 FY21 in constant currency terms (CC) with service revenue declining 14.3% QoQ. Though U.S. dollar revenue is expected to decline by 10-15% in CC terms in FY21, growth may recover Q2 FY21 onwards in all segments except aerospace. Ebit margin is lower by 328 basis points QoQ mainly due to lower business volume which was offset by lower Selling General and Administrative spend. Cyient's issues are more related to client spend rather than own execution and wallet share loss related exacerbated by structural weakness in aerospace space.

Top five clients contribute 32.3% to revenue. The company is focused in de-risking its top-5 clients profile by gaining more wallet share in top 6-10 accounts. Free Cash Flow (FCF) conversion was also healthy at Rs 2,163 million in Q1 FY21 with an FCF/Ebitda conversion of 138.1%.

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ICICI Securities Cyient_Q1FY21_results.pdf

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