Cyient Ltd, whose shares have been down 17.50 percent in the previous year, presented a dismal set of June quarter results on all fronts. The IT business reported sales and margins that were far below than analysts' expectations. Cyient's management also decreased its FY25 DET (digital, engineering, and technology) revenue growth target to flat YoY from high single digits, which analysts noted was the lowest among its midcap and small-cap rivals.  

"Cyient now requires 3 percent or more CQGR to meet its FY25 flat YoY revenue target, which we believe is a hard order given broad-based deterioration. Cheap values restrict the possible downside. We are lowering consolidated FY25/26 EPS by 15%/12% due to a substantial reduction in DLM expectations," Nuvama Institutional Equities stated.

Nuvama described Cyient's first-quarter results as surprising and stated that only realistic values can salvage the company. The local brokerage has reduced its earnings forecasts for September 2026 to 20 times from 22 times due to lesser growth visibility, yielding a target price of Rs 1,840 from Rs 2,120 before.

"Cyient (DET) announced a miss against lowered expectations. The top-line performance was unimpressive (5% quarterly decrease), with revenue declining across verticals and flowing through the P&L, resulting in a 250 basis point quarterly EBIT margin decline. The business predicts flat revenues in FY2025E (previously high single-digit growth), which we believe is still ambitious. We reduced our profit forecast by 14-18% for FY2025-27E. Kotak Institutional Equities stated that the model's fundamental strength remains, notwithstanding a few challenges in its updated estimates.

This firm maintained its 'Buy' rating on the company but reduced its fair value objective to Rs 2,050 from Rs 2,275 before. Cyient management anticipates growth to resume from Q2FY25, with H2 outperforming H1.

Nuvama said that the EBIT margin for the DET business was 13.5%, a steep drop of 250 basis points sequentially owing to revenue reduction headwinds. Due to the uncertain growth scenario, the margin forecast for FY25 has been revoked. Cyient aims to attain a 1 percent departure rate margin by Q4FY25, compared to 16 percent for the entire year FY25 previously.

"Cyient dramatically dropped guidance and will be one of the lowest among midcap/small-cap peers - which looks to be a difficult order right now. The broad-based decrease across verticals casts doubt on the growth recovery route. "We remain negative on Cyient, even though cheap valuations limit the downside potential," Nuvama added.

The brokerage values Cyient's DET business at 20 times FY26E PE and DLM at current market capitalization, after adding a 20% Holdco discount.