IT firm Cyient Ltd has once again cut its FY25 revenue growth guidance to minus 2.7 per cent against flat earlier and exited its margin guidance, following a 32 per cent drop in the December quarter profit. Besides, its CEO Karthikeyan Natarajan has resigned, with promoter Krishna Bodanapu taking over as the interim CEO. The developments have led analysts cut their earnings estimates and target prices for Cyient.
The Cyient management started FY25 with high single-digit revenue growth guidance, which has been cut repeatedly to minus 2.7 per cent decline now. "The weak exit rate also impacts growth prospects for FY26. We remain negative on Cyient even as inexpensive valuations limit the downside potential," Nuvama said.
This brokerage cut its FY25 and 26 EPS estimates sharply by 10.8 per cent and 4.5 per cent, respectively, on lower growth and margins. It suggested a revised target price of Rs 1,660 from Rs 1,700 earlier.
Cyient reported an in-line revenue growth (2.4 per cent QoQ CC), but the guidance cut, weak exit margin and CEO's resignation are the negative surprises, said HDFC Institutional Equities. The softness in revenue was led by the right-shifting of deals and a slowdown in the sustainability vertical due to the completion of some large projects, the brokerage said.
"We cut our revenue estimate by 2 per cent and EPS estimate by 5 per cent to factor in slower growth and weak margins. We maintain our ADD rating with a target price of Rs 1,790, based on 22 times FY27E DET EPS (vs 23 times earlier) and adding Rs 163 per share for the Cyient DLM stake," HDFC Institutional Equities said.
The stock plunged 17 per cent to hit a low of Rs 1,440 on BSE. in Friday's trade. For the quarter, consolidated revenue for Cyient grew 3.3 per cent QoQ and 4.2 per cent YoY with DET revenue growth of 2.4 per cent CC QoQ (down 1.9 per cent CC YoY).
Among verticals, Connectivity (up 5.7 per cent CC QoQ) led the growth, driven by strong execution and ramp-up in North America. Transportation grew 3.7 per cent CC QoQ, led by deal ramp-ups in aerospace along with robust demand from existing customers while rail transportation remained flat.
"NGA grew 2.1 per cent CC QoQ while Sustainability declined 1.3 per cent CC QoQ, due to continued challenges. Order intake came in strong at $312 million, up 99 per cent QoQ/up 5 per cent YoY. Large deals’ TCV at $234.5 million comprises 13 large deals. The management is winning deals in the areas of emerging technologies, and expects this momentum to continue," Nuvama said.
Nuvama said the management has lowered its FY25E DET revenue guidance to 2.7 per cent CC degrowth YoY from flat revenues YoY. Negative surprise primarily came from the Sustainability vertical as some of the existing deals are getting over while new deals are getting delayed in ramp-up.
"The management expects revenue to be flat in Q4 and pick up from Q1FY26E. DET EBIT margin decreased 72 bps QoQ to 13.5 per cent, impacted by wage hikes and FX headwinds, partially offset by revenue growth and operating efficiencies. Management has also slashed the Q4FY25E exit EBIT margin to 13.5 per cent from 16 per cent earlier," Nuvama said.