You are here: Home » Markets » News
Business Standard

Cyient gains 5% as Q2 consolidated Ebit margin grows 586 bps QoQ to 11%

In the past month, Cyient has underperformed the market by falling 13 per cent, as compared to a 1.5 per cent rise in the S&P BSE Sensex till Thursday.

Topics
Cyient Limited | Buzzing stocks | Markets

SI Reporter  |  Mumbai 

Service sector
The company believes it can sustain 11 per cent EBIT margins as seen in Q2FY21 and expects Q4FY21E margins to be higher.

Shares of Cyient were up 5 per cent to Rs 383 on the BSE on Friday after the company reported 586 basis points (bps) expansion in consolidated EBIT (earnings before interest tax) margin at 11.0 per cent in September quarter (Q2FY21) on a sequential basis. The improvement in margins was led by higher utilisation, lower subcontracting cost, and lower restructuring cost. Consolidated revenue grew 1.3 per cent quarter-on-quarter (QoQ) in constant currency terms.

In rupee terms, revenue grew by 1.2 per cent QoQ to Rs 1,003 crore while EBIT grew by 116.2 per cent QoQ off a very low base to Rs 110.5 crore. The company’s profit after tax increased by 3.0 per cent QoQ mainly from higher operating income driven by higher volume and efficiency.

“While the company did post growth in revenues it was well short of the growth posted by larger companies like Infosys and TCS. This was largely due to the continued de-growth in the aerospace and defence segment which is amongst the worst impacted due to the Covid-19 pandemic and de-grew by 10.4 per cent QoQ. will look forward to management commentary, especially, on the outlook for the aerospace and defence segment,” analysts at Angel Broking said.

“Going forward, the company expects communication, transportation, and medical segment to drive revenue growth and believes aerospace revenues have bottomed out in Q2FY21. Hence, Cyient expects QoQ improvement in revenues in the coming quarters,” ICICI Securities said in a note.

In terms of margins, the company believes it can sustain 11 per cent EBIT margins as seen in Q2FY21 and expects Q4FY21E margins to be higher. Hence, we believe revenues will improve in the coming quarters while margins will improve to at least 12 per cent in FY22E. This coupled with reasonable valuation prompt us to be positive on the stock, it said.

In the past month, Cyient has underperformed the market by falling 13 per cent, as compared to 1.5 per cent rise in the S&P BSE Sensex till Thursday.

At 12:40 pm, the stock was up 4 per cent at Rs 381 on the BSE, against 0.61 per cent rise in the Sensex. The trading volumes on the counter jumped over 6-fold with a combined 2.27 million equity shares changing hands on the NSE and BSE.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Fri, October 16 2020. 12:45 IST
RECOMMENDED FOR YOU
.