Cyient is a Hyderabad based Engineering Services organization. Founded in 1992 (as Infotech Enterprises) by BVK Mohan Reddy (recently awarded the Padma Shri), it has grown from a GIS data processor to a complete Engineering Services player. They claim to be the pioneers in Engineering Services Outsourcing and the de facto leader in pureplay Engineering services in India. Chief industries of focus are Aerospace & Defence, Utilities and Communication, with primary clients in the US. The company has been focusing increasingly on Design Led Manufacturing, so broadening the service delivery expertise from Engineering Design to include Pilot Manufacturing.
Having started off with digitizing maps, Cyient really got its ESO credentials only in 2000, with some wins in Aerospace. Pratt & Whitney was one of their first customers and actually invested in Cyient in the early 2000s (and recently exited).
Some facts & figures:
Revenue ₹3600 Cr, up 16% y-o-y
PAT ₹370 Cr, up 10% y-o-y
Operating Profit Margin 13%, NPM 10%
A&D, Communication and Utilities contribute 75% of revenues
Americas and Europe contribute 77% of revenues
Market Cap of ₹6100 Cr at CMP of ₹545, trailing P/E of 16
Cash of ₹900 Cr, so approximately ₹90 per share of cash.
Debt to Equity of 0.1
Receivable Days reducing from high 70s to 66 now.
Net Profit to CFO conversion also seems alright, with CFO slightly greater than Net Profits.
The company is in acquisition mode, with 3 acquisitions in the last year. Their 2020 strategy clearly lays out inorganic mode as a growth driver. While not a concern per se, how these acquisitions pan out is an unknown.
Sales and PAT growth rates are on a downward trend, from late teens to low double-digits. Same with dividend payouts
Low promoter holding of 22%. FIIs hold 45% and MFs 6%
Analyst Coverage: IDBI named Cyient as one of its 4 Diwali picks. Brief from an interview -
_What about Cyient? There was a big block deal in Cyient today. It is the second Diwali pick. Currently it is at Rs 500 odd and you believe Rs 645 can be achieved on Cyient. There was a big block deal today after which the stock shot up 5-6%. What is the rationale here, what are the growth triggers here? _
_In IT stocks, this midcap IT stock has been growing in double digits and the management is confident that the growth will be continuing in double digit and they had … _
Disclosure: Invested 4% of portfolio at around CMP