Equity | India | IT Services Cyient Ltd. Growing with technology…… April 05, 2018 BUY Analyst Omkar Tanksale +91-22- 6614 2692 [email protected]Institutional Research 1 Initiating Coverage CMP (`) Target (`) 665 807 Potential Upside Absolute Rating 21% BUY Market Info (as on April 05, 2018) BSE Sensex 27,975.86 Nifty S&P 8,492.30 Stock Detail BSE Group A BSE Code 532175 NSE Code CYIENT Bloomberg Code CYL IN Market Cap (`bn) 57.29 Free Float (%) 65% 52wk Hi/Lo 698.00 / 467.00 Avg. Daily Volume (NSE) 36971 Face Value / Div. per share (`) 5.00 / 3.00 Shares Outstanding (mn) 112.2 Shareholding Pattern (in %) Promoters FIIs DII Others 22.23 35.78 13.43 28.56 Financial Snapshot (`mn) Y/E Mar FY16 FY17 FY18 FY19E Net Sales 30,956 35,858 38,654 44,452 EBITDA 4,208 4,772 5,412 6,223 PAT 3,263 3,396 4,058 4,736 EPS 29.0 30.6 36.6 42.7 ROE (%) 17% 16% 17% 18% ROCE (%) 21% 21% 22% 23% P/E 16.3 16.8 16.8 14.4 EV/EBITDA 11.3 10.5 11.0 9.4 Share Price Performance 95 115 135 155 175 195 215 03-Apr-17 24-Apr-17 15-May-17 05-Jun-17 26-Jun-17 17-Jul-17 07-Aug-17 28-Aug-17 18-Sep-17 09-Oct-17 30-Oct-17 20-Nov-17 11-Dec-17 01-Jan-18 22-Jan-18 12-Feb-18 05-Mar-18 CYIENT Adj SENSEX Adj Rel. Perf. 1Mth 3 Mths 6Mths 1Yr Cyient (%) 3.67 14.04 28.38 40.77 Sensex (%) (3.6) (3.2) 5.1 24.36 Source: Company data, Institutional Research Company Snapshot Cyient Ltd. (Cyient) formerly known as Infotech Ltd. is an Indian IT services providing company. Cyient is headquartered in Hyderabad (India) and majorly focus on the domains such as Engineering, networking and operations. Cyient specializes in end to end solutions from co creation and managing product life cycle which also helps Cyient to create long term relationship with its clients. Cyient has also developed robust engineering ecosystem, functional expertise, and streamlined processes. They deliver reliable and innovative products and services, helping its clients to achieve and maintain competitive advantage. Investment Rationale Focus on moving up the value chain which will help to generate higher Realization Cyient focus more on the product engineering and process engineering segment. More than 62% of its revenue comes from the segment. Now company has also started to focus more on the nonlinear business verticals like system integration, testing, embedded system etc. which help to take value chain on the next level. This will also create Cyient better business opportunities not only across verticals but also to give more robustness to the business structure. Efficient use of the reserves to acquire companies will help to strengthen the business Cyient has also history to use its reserves to strengthen the business among different verticals. This helps Cyient to acquire new technology among different verticals and help to build brand. Cyient has able to generate cash reserves on its balance sheet which help them to acquire the business without raising the debt burden on their balance sheet. Company also finalizes the strategic plan for growth for the verticals. Long term contracts with global players will help Cyient to give more consistent performance Cyient specializes in providing end to end engineering solution to the companies across verticals. The company has also become successful in delivering complete product engineering solutions. Cyient has penetrated the business across geographies and make the company a strong brand name in the field of product and process engineering. Strong clientele guarantees the revenue over long term period. Timely delivery of the project will help the company to have empanelment with the major businesses across the geographies. This strategy of the company will help to create more stable business structure and also to perform consistently over the longer period of time. The vertical wise list of clients given below gives an idea of empanelment across the verticals and robustness of the business. Valuation At the CMP of `665, Cyient is trading at 21.6x and 18.1x its FY17, and FY18E EPS of `30.6 and `36.60. Compared to its peers; Cyient is trading at a discount P/E multiple, although its margins are better than or comparable to peers. We initiate coverage on Cyient Ltd with a BUY rating and attach a multiple of 18.9 xs to Cyients’ FY19E earnings (EPS) of `42.7 to arrive at the target price of `807.0, indicating a potential upside of 21%.
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Equity | India | IT Services C yient Ltd. Initiating ...static-news.moneycontrol.com/static-mcnews/2018/04/Cyient-09042018.pdfCyient Ltd. (Cyient) formerly known as Infotech Enterprises
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Recommendation Expected Absolute Return (%) over 12 months
BUY >15%
ACCUMULATE <10% and >15%
NEUTRAL <-10% and <10%
REDUCE >-10% and <-20%
SELL >-10
Expected absolute returns are based on share price at market close unless otherwise stated. Stock recommendations are based on absolute upside (downside) and have a 12-month
horizon. Our target price represents the fair value of the stock based upon the analyst’s discretion. We note that future price fluctuations could lead to a temporary mismatch
between upside/downside for stock and our recommendation.
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or
indirect compensation in exchange for expressing specific recommendations or views in this report:
Name : Omkar Tanksale
Sector : IT Services
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