Home / Markets / Stock Markets /  After paying interim dividend of 200% for FY23, this IT stock is seen to cross 1,000-mark
Back

After paying interim dividend of 200% for FY23, this IT stock is seen to cross 1,000-mark

In Q2FY23, Cyient gained traction in the services business, while its margins picked up across different businesses.Premium
In Q2FY23, Cyient gained traction in the services business, while its margins picked up across different businesses.

  • Going forward, Cyient is expected to cross the 1,000 mark as Anand Rathi expects the company's wider services and sales investments to improve the next fiscal year FY24 growth. The stock brokerage has given a buy recommendation on Cyient.

IT-enabled services provider, Cyient is currently a little over 800 mark on stock exchanges. The company holds a good track record of paying dividends to its shareholders, and the latest one would be a 200% interim dividend for FY23. In Q2FY23, Cyient gained traction in the services business, while its margins picked up across different businesses. Going forward, Cyient is expected to cross the 1,000 mark as Anand Rathi expects the company's wider services and sales investments to improve the next fiscal year FY24 growth. The stock brokerage has given a buy recommendation on Cyient.

At around 9.34 am, Cyient shares are trading at 811 apiece up by 3.25 or 0.40%. The stock has touched an intraday high of 815.15 apiece in the opening deals. The IT firm's market cap is around 8,948.57 crore.

So far in November, this midcap stock has risen by nearly 9% on Dalal Street.

In its latest report dated November 28, Anand Rathi said, "to reduce concentration and thus raise expectations of steady organic revenue growth, Cyient diversified its services portfolio in FY23 via acquisitions. It is working toward building a sharper sales organization to benefit from its wider services. Order intake (in Q2) has yet to improve notably but the large-deal pipeline ($1 billion+) reflects early gains. Services margins are likely to touch 15% with operational rigor (mostly higher offshore) and CAPEX is likely to be lower, converging to peers, thus raising FCF. DLM would be an additional value driver, with growth acceleration ahead, suggested by Q2 orders."

Further, the stock brokerage said, Cyient believes its 5x5 (five industry verticals and five service lines) operating model, reduced portfolio drags (Rail down 24% y/y as in Q2), the brighter outlook in Aero (up 8% y/y) and investments in large deals ($530 million in H1, $1bn+ pipeline) should help it grow 15% organically. Besides, it believes, it can operate at a 15% EBIT margin with ~3% gains expected in operational efficiency (50% offshore offers opportunity). In Q2, Cyient had 12.5% (adj.) Services margins (15.3% in FY22).

Highlighting the company has not seen growth in DLM in the last three quarters, Anand Rathi's note stated that however, improvement is likely as it has signed large orders in Q2.

It said, "TTM order intake in Q3 FY22 was $150m, which came down to $104m in Q1. However, in Q2, it rose to $189m, with Q2 intake of $118m. This will accelerate growth to a ~17% FY23-25 CAGR. The company has decided to carve out this division to capture better scale-up opportunities and sharpen management’s focus on the Services division. DLM’s EBITDA margins are likely to be ~11-12%."

On the valuation, Anand Rathi's note said, the stock quotes at 12x FY25e EPS of Rs.68, attractive, given expectations of rising organic growth, potential value creation opportunities in the DLM carve out, and after factoring in some risks due to the company’s acquisitive nature.

"Cyient is currently net-debt, which restricts its ability to wade through in a tough environment. Therefore, we value the stock at 15x FY25e EPS. Risk: M&A-integration-related," the stock brokerage said.

In the second quarter of FY23, Cyient recorded a consolidated net profit of 79.1 crore compared to 121.3 crore in Q2 of FY22. Revenue from operations, however, climbed to 1,396.2 crore in Q2FY23 versus 1,111.6 crore in the same quarter last year.

The company's second-quarter growth was primarily driven by strong momentum in services and increased margins across different businesses. It recorded a 58% yoy growth in group order intake, while offshoring witnessed a growth of 48%.

Cyient is a leading consulting-led, industry-centric, global technology solutions company.

During the Q2 announcement, Cyient also had an interim dividend of 10 per equity share (200%) having a face value of 5 each for the fiscal FY23. The dividend was paid by November 9, 2022.

For the financial year FY22, Cyient paid a dividend of 480% aggregating to 24 per equity share.

Currently, its dividend yield is around 2.97%.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

Know your inner investor Do you have the nerves of steel or do you get insomniac over your investments? Let’s define your investment approach.
Take the test
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

GENIE RECOMMENDS

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started

Trending Stocks

×
Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout
x