MOSL: CYIENT (Neutral)-In-line services growth, but softening organically
Cyient: In-line services growth, but softening organically
(cyl IN, Mkt Cap USD1.0b, CMP INR676, TP INR750, 12% Upside, Neutral)
- In-line growth in Services: Revenue growth of 5.1% QoQ was better than our estimate, primarily due to the beat in the Design-Led Manufacturing (DLM) business. In Services, revenue growth of 3.5% QoQ CC was in line with our estimate of 3.8%. EBITDA margin expanded 150bp QoQ to 13.7% (50bp beat), as the impact of wage hike was more than offset by currency tailwinds and efficiencies. PAT grew 54% QoQ to INR1.27b (largely in-line).
- Organic Services growth coming off: In Services, CYL clocked 10.2% YoY CC growth in 2Q. However, this included revenue from AnSem, excluding which, growth would have been lower by 2pp, marking deceleration from 11.7% YoY CC growth in FY18. Achievement of double-digit growth in FY19 is contingent on continued momentum in 2H, but would still reflect a slowdown on an organic basis.
- Focus on the long term continues: Earlier in the year, CYL alluded to 100bp investments in the New Business Accelerator (NBA) program, which would keep margins flat in FY19. It added seven projects to the program, taking the total to 19, and expects accelerated EPS growth (incremental growth of 5-10pp) from FY21 (year three onward).
Cyient Limited, formerly Infotech Enterprises Limited, is engaged in providing software-enabled engineering and geographic information system (GIS) services. The Company's segments include Data & Network Operations (DNO); Engineering, Manufacturing, Industrial Products (EMI), and Product Realisation (PR). DNO vertical services industries, such as power, gas, telecom, transportation and local government, and offers data conversion, data maintenance, photogrammetry and information technology (IT) services to the DNO vertical. EMI vertical services customers in industries, such as aerospace, automotive, off-highway transportation and industrial and commercial products, engineering design, embedded software, IT Solutions, manufacturing support, technical publications and other strategic customers. PR vertical services is engaged in providing electronic manufacturing solutions in the fields of medical, industrial, automotive, telecommunications, defense and aerospace applications.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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