Reasonably good results when compared to others. But DLM seems better.
2f87ebd2-03da-4f11-a58a-bed080c1ae06.pdf (682.2 KB)
Very poor results by Cyient. Management guided for high single digit growth and delivered 5 pc degrowth. Have been missing guidance regularly.
Invested and looking to exit.
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Few of my takeaways from Q1 FY25 of Cyient Limited
๐๐จ๐ซ๐ฉ๐จ๐ซ๐๐ญ๐ ๐๐ซ๐๐ฃ๐๐๐ญ๐จ๐ซ๐ฒ:
- Cyient faced significant operational challenges in Q1 FY25, resulting in weaker-than-expected performance.
- However, the company is confident of a robust recovery starting Q2, driven by a strong order book, double-digit growth in order backlog, and healthy engagement with top customers.
- The management expects H2 FY25 to be stronger than H1, with flattish year-on-year revenue growth for the full year.
๐๐ญ๐ซ๐๐ญ๐๐ ๐ข๐ ๐๐ฅ๐ฎ๐๐ฉ๐ซ๐ข๐ง๐ญ:
- Cyient has announced the setup of a wholly-owned subsidiary to drive dedicated focus on turnkey ASIC design and chip sales through a fabless model for analog mixed-signal chips.
- This move is aimed at capitalizing on the growing semiconductor market opportunities, leveraging Cyientโs existing capabilities in design, fabrication, and testing.
- The new semiconductor business unit is expected to unlock value for shareholders, akin to the success of Cyient DLM.
๐๐๐ซ๐ค๐๐ญ ๐๐ฒ๐ง๐๐ฆ๐ข๐๐ฌ:
- The global semiconductor market is poised for significant growth, expected to reach $1 trillion by 2030, with the Indian market forecast to reach $100 billion by 2030.
- Cyient is well-positioned to capitalize on these opportunities, given its extensive portfolio of intellectual properties, long-standing client relationships, and global capabilities.
- The company is also making progress in emerging technologies like Generative AI, winning multiple projects across various business segments.
Industry Tailwinds:
- The semiconductor industry is experiencing strong demand, driven by the increasing adoption of analog mixed-signal chips across various industries, including automotive, healthcare, and industrial automation.
- Cyientโs expertise in designing and fabricating these specialized chips aligns well with the industryโs growth trajectory.
Industry Headwinds:
- Delays and project shifting in Q1 FY25, particularly in the connectivity and sustainability segments, impacted the companyโs performance.
- The continuing stress in the rail sector also contributed to the weaker-than-expected results.
๐๐ง๐ฏ๐๐ฌ๐ญ๐จ๐ซ/๐๐ง๐๐ฅ๐ฒ๐ฌ๐ญ ๐๐ฎ๐๐ฌ๐ญ๐ข๐จ๐ง๐ฌ:
- Analysts were surprised by the magnitude of the miss in Q1 FY25, questioning the companyโs forecasting accuracy and process.
- The management acknowledged the challenges and indicated that they are working to refine the forecasting process, incorporating lessons learned from the recent experiences.
- The company is also focusing on improving the predictability of the project-based business, especially in connectivity and sustainability, to better manage potential delays and ramp-ups.
Competitive Landscape:
Cyientโs established capabilities in design, fabrication, and testing of analog mixed-signal chips, along with its growing semiconductor business, position the company as a unique player in the evolving Indian semiconductor landscape.
๐ ๐ฎ๐ญ๐ฎ๐ซ๐ ๐๐ซ๐จ๐ฃ๐๐๐ญ๐ข๐จ๐ง๐ฌ:
- For FY25, the company has provided a flattish year-on-year revenue growth guidance, citing a prudent approach after the Q1 miss.
- However, the management remains confident in achieving a strong recovery in Q2 and H2, driven by a robust order book and growing engagement with top customers.
- The company aims to reach its previous yearโs EBIT margin range of 16% by the end of FY25, as the revenue growth trajectory strengthens.
๐๐๐ฉ๐ข๐ญ๐๐ฅ ๐๐๐ฉ๐ฅ๐จ๐ฒ๐ฆ๐๐ง๐ญ:
- Cyient has been proactively managing its debt position, which has seen a 44% year-on-year reduction in Q1 FY25.
- The company is focused on maintaining a healthy balance sheet to support its growth initiatives, including the new semiconductor business.
Opportunities & Risks:
- The growing semiconductor market and Cyientโs unique end-to-end capabilities present significant opportunities for the company to drive long-term growth and value creation.
- Execution risks related to the new semiconductor business, as well as potential delays in project ramp-ups, remain key concerns that the management needs to address.
๐๐๐ ๐ฎ๐ฅ๐๐ญ๐จ๐ซ๐ฒ ๐๐ฅ๐ข๐ฆ๐๐ญ๐:
The Indian governmentโs various initiatives to promote the domestic semiconductor industry, such as the Production-Linked Incentive (PLI) scheme, provide a supportive regulatory environment for Cyientโs semiconductor aspirations.
๐๐จ๐ง๐ฌ๐ฎ๐ฆ๐๐ซ ๐๐ฎ๐ฅ๐ฌ๐:
- Cyientโs top 10 customers have seen double-digit year-on-year growth, indicating their continued confidence in the companyโs capabilities.
- The management is focused on improving the predictability of project-based businesses to better align with customer needs.
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Any recent insights on the company.
i have been following this company and think company will do well.
The immediate resignation of the CEO can be due to the severe underperformance of the Cyient group including lower guidance for 2025 and underperformance at Cyient DLM(subsidiary).
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