MOSL: CYIENT (Neutral)-Tepid growth in Services drives moderation in outlook
CYIENT: Tepid growth in Services drives moderation in outlook
(CYL IN, Mkt Cap USD1b, CMP INR628, TP INR720, 14% Upside, Neutral)
- Revenue growth in line: CYL's 3QFY19 USD revenue decline of 2.1% QoQ was largely in line with our estimate. In Services, revenue declined 0.2% QoQ CC, in line with our flattish growth expectation. EBITDA margin expanded 100bp QoQ to 15.7% (90bp beat) as a result of higher operational efficiency and lower SG&A costs (20.3% v/s our estimate of 21.2%). PAT declined 27% QoQ to INR921m, led by higher-than-expected forex losses.
- Softness in Communications dragged Services: While softness in Aerospace revenue was anticipated on account of seasonality, the 3.3% decline in Communication was a surprise. YoY growth is now down to 6.5% (the segment grew 24% last year), led by a large contract getting pushed to 4Q.
- Marginal moderation in Services growth; buyback postponed a bit: On the back of a tepid 3Q with flattish Services revenues, CYL moderated its Services revenue growth guidance to 8.5-9.5% YoY CC for FY19 (v/s double-digit earlier). The 4Q ask-rate to meet the same is 4-8% QoQ CC. On the margins front, CYL now expects YoY margins to be flat (v/s earlier guidance of +50bp), mainly due to the lesser impact from efficiency drivers. Also, the company will reconvene a meeting for the buyback later during this quarter, with some finer details yet to be finalized.
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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