Cyient stock up 103% in CY23 so far; should you consider buying?

Despite the market uncertainties, shares of Cyient, a global digital, engineering, and technology solutions company, have delivered handsome returns to their shareholders. Year to date, the company’s shares have surged by 103%, rising from ₹803.70 per share to ₹1,634.50 per share.

Impressively, the stock has closed in the green for eight out of the last ten months. The largest gains were recorded in April with an 18.56% increase and June with a 15.63% rally. This recent rally has propelled the stock to a remarkable 118.44% gain in one year and an astounding 315% growth over the last three years.

This year, the stock achieved significant milestones, breaking the ₹1,000 mark for the first time on March 24 and maintaining its upward momentum to reach a record high of ₹1,945 in September, coming tantalizingly close to the ₹2,000 level.

Cyient is a mid-cap IT stock with a market cap of over ₹18,000 crore. The company is engaged in providing global technology services and solutions, specialising in geospatial, engineering design, IT solutions, and data analytics.

On October 19, the company delivered healthy numbers for the September quarter (Q2 FY24), reporting strong revenue growth at ₹1,778 crore, up by 27.4% YoY. The revenue from its Digital Engineering & Technology (DET) segments grew by 22.3% to ₹1,476 crore, driven by growth across the Transportation, Sustainability, and Automotive BU’s. The company won five large deals in DET business, with a total contract potential of $51.4 million in Q2 FY24, as per the company’s earnings report.

Further, the revenue from Cyient DLM rose by 71.5% YoY to ₹291.8 crore, while it reported a 132% YoY growth in its consolidated net profit to ₹183 crore in Q2 FY24.

For FY24, the company guided DET revenue growth to be in the range of 15–20% YoY in constant currency terms.

Following the company’s Q2FY24 performance, domestic brokerage firm Geojit Financial Services has downgraded the rating on the stock to ‘hold’ with a target price of ₹1,732 apiece based on SOTP valuation.

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The brokerage said despite strong deal wins, a promising revenue outlook in most of the segments, and expectations of improvement in margins with healthy FY24 guidance, the company is facing strong headwinds on current geopolitical tensions prevailing in West Asia, which may disrupt logistics in DLM business. Moreover, a slowdown in the communication segment is likely to limit topline growth, it added.

Similarly, IDBI Capital also downgraded the rating on the stock to ‘hold’ from ‘buy’ considering the recent run-up in stock price. However, the brokerage raised its target price to ₹1,915 apiece from an earlier price of ₹1,705.

The brokerage expects margins to improve by 224 bps and 22 bps to 14.6% and 14.9%, led by healthy revenue growth & cost optimisation measures. This led to an EPS upgrade of 2.5% and 3.2% for FY24E & FY25E.

On the other hand, Motilal Oswal and Axis Securities retained their ‘buy’ ratings on the stock, setting a target price of ₹1,980 and 1,940, respectively.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.