Cyient - In a Sweet Spot :: Edelweiss, link

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We recently met Mr Krishna Bodanapu, CEO and MD, and Mr. Ajay Aggarwal, CFO of Cyient, to gain perspective on the demand outlook and get a peek into the company’s prospects and strategy. The company remains confident of extending the momentum seen in H1FY15 in H2FY15 and further in FY16 as well. This confidence stems from the positive outlook in its top-20 clients that account for ~70% of its revenues. Further, over the longer term, the company targets to drive higher contribution from system design and solutions and reduce the services component. We believe Cyient will benefit from higher than expected spend in the engineering and R&D (ER&D) space owing  to  the domain expertise it has built and investments in niche segments like aerospace (AS) and rail.

Engineering and network presence – In a sweet spot

Cyient, with strong domain capability in the engineering and network space will be a key beneficiary of the rising ER&D spends. Domain capability in AS and rail segments and continued investments in utilities, telecom, medical equipment place the company in a sweet spot given improved demand environment for these segments. It expects the momentum seen in H1FY15 to extend in H2FY15 and FY16, given strong order book and pipeline from its top-20 clients. We expect Cyient to post 16% revenue growth (USD) in FY16.

Shift to system designs and solutions from service-based approach

Over the longer term, the company plans to increase contribution from system design and solutions thereby reducing the services component from. This shift from services-system design-solutions will enable it to move up the value chain and aid margin sustenance.  Over the long term, the company expects to operate at EBITDA margin range of 18-20%.

LINK
https://www.edelweiss.in/research/Cyient--In-a-Sweet-Spot/27727.html