Cyient Ltd. was down by 9% on Friday after the organization recorded a 15% reduction in net profit for the three months ending June 2024. This caused Nuvama to reduce the price target on the stock further.
Image Source: Cyient
Profit Decline and Revenue Impact
The net profit of Cyient declined to Rs 148 crore in the latest quarter from Rs 197 crore reported in the same period of the previous fiscal. Nuvama has downgraded Cyient to ‘hold’ from ‘buy’ and has set the target price of the stock to Rs 1,840 from Rs 2,120 earlier, which holds a negative downside of about 3% compared to the previous close. The revenue generated by the company was lower by 9.9% to Rs 1,676 crore during the same period. Nuvama released a note on July 25, pointing to low earnings and scarce new orders. With flat year-on-year revenue guidance for fiscal 2025, Cyient needs more than the 3% compounded quarterly growth rate.
Reasons behind Cyient’s Profit Decline
The earnings of Cyient Ltd. for the first quarter of 2024 were lower than the previous quarter because of problems with project implementation. Delays and right shifts in project execution were worse than expected across the board, particularly in the connectivity segment. These delays affected both the top line and the bottom line. Consequently, the total revenue of Cyient during Q1 has reduced to 0.6% YoY, and 9.9% sequentially, and stood at Rs 1,675.7 crore.
The industry’s leading revenue-generating segment, DET (Digital, Engineering, and Technology), was over 80%, and in terms of QoQ, its revenue fell by 5%, and operating profit decreased by 2.8% YoY decline. Cyient faced profit woes due to problems with the implementation of projects and revenues in some segments. It also tracks the company’s performance and has adjusted its fiscal year 2025 revenue estimate to a lower figure.
Market Impact
Cyient’s shares had increased as much as 8.99% even as the company experienced a drop in its profit during the day to Rs 1,723.9 apiece. Each of them has a float on the NSE. However, they were trading 7.69 percent lower at Rs 1,748.6 apiece in the later part of that day, while the other two were a 0.47% increase in the benchmark Nifty 50. In the last 12 months, the stock has gone up by 19.5% while it has reduced by 24% year to date. Analysts’ Views: Among the 22 analysts covering the firm, 17 are bullish on the stock, three remain neutral, and two are bearish on the stock.
Long-Term Prospects of Cyient
Among the newly listed firms, Cyient DLM Limited has attracted public attention because of its excellent listing result. Cyient DLM offers EMS in the form of build-to-print and build-to-spec services, product design, and flexible manufacturing services. The EMS segment has described a high growth rate and is projected to maintain this trend.
It is set for a better future with plans to cut the debt levels and increase its operations. Cyient DLM is fundamentally sound and has a growth trajectory to its credit. It is well placed to harness the increasing trends in the adoption of digital manufacturing solutions. Nonetheless, most analysts are bullish on the stock, which should be held for the long term. In a way, fresh entry could be good for corrections while the existing investors can retain the shares.
Conclusion
Currently, Cyient has issues with maintaining revenue growth, and its investors are waiting for its performance in the subsequent quarters. The downward revision of the target price to reflect the company’s financial health.
