Over 3x return in 1 year: Better visibility in core business may further boost this wealth creator

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Cyient, a Hyderabad-based smallcap IT firm, has been buzzing on Dalal Street due to its outstanding performance in the past one year. With a return of 220%, shares of the company have outpaced the benchmark BSE Sensex (up 53%) since April 22 last year. The scrip has jumped to Rs 687.95 from Rs 214.95 during the same period.

Cyient has got several ‘Buy’ calls from analysts after its better-than-expected financial results for the quarter ended March 31. The company on Thursday said its net profit has grown by 46.8% to Rs 110.7 crore for the March 2021 quarter. It had posted a net profit (normalised) of Rs 75.4 crore in the year-ago period. On a sequential basis, the net profit was up by 16% from Rs 95.4 crore.

Its revenue increased 1.8% to Rs 1,093.2 crore for the period under review as against Rs 1,073.6 crore in the fourth quarter of FY20.

Brokerage HDFC Securities maintained an ‘Add’ call on Cyient, based on improving growth outlook in the services business and better than expected margin performance. It has set a target price of Rs 765 for Cyient.

Another broking firm Motilal Oswal also retained ‘Buy’ on Cyient with a target price of Rs 810. “We maintain our buy rating on attractive valuation. FY21 services order intake and bottoming out of the aerospace business should give us confidence in FY22 services USD revenue growth guidance of double-digit growth, although from a low base,” Motilal Oswal Financial Services said.

ICICI Securities is also bullish on Cyient with a price target of Rs 688. “Revenue growth (over 4.7% QoQ, CC) and normalised EBIT margin (12.6%) were ahead of estimates. In addition to scope for further earnings upgrades, the possibility of a structural rerating is very likely, given the massive discount to midcap peers. Our FY22E-FY23E earnings trajectory remains largely stable. Cyient remains our top ‘Buy’ idea across midcap and smallcap categories,” the brokerage said.