Large Cap IT Stock Has Slumped 13% In 30 Days, But Analysts See 50% Upside Ahead

Cyient share price has had a tough few weeks at the bourses. In the last 30 days, the stock has slumped around 13% but analysts at Axis Securities think the stock can bounce back.

The Cyient Analyst: Omkar Tanksale for Axis Securities maintained the “buy” rating for the stock raising the price target to ₹3,000 from ₹2,195. The revised target indicates an around 50% upside from the current market price of around ₹2,000.

The Cyient Thesis: The brokerage firm in its note said that the company’s December quarter results beat its estimates on most fronts including revenue, EBITDA and deal wins. However, the company’s net profit of ₹147 crore missed the analyst’s estimates by 18%.

From a long-term perspective, the analysts said that Cyient is a favourable bet as a leading player in Engineering, Research, and Development (ER&D), boasting an improved outlook and notable deal wins. As per the brokerage, the recent recovery observed in the company’s performance is sustainable over the next two to three years. However, concerns are rising due to uncertainties stemming from large economies and supply-side constraints, which may impact the company’s growth prospects.

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The analyst said that the decline in profit was aided by a one-time impairment cost of ₹38 crore. Tanksale added that Management anticipates overall revenue growth in FY24 to be in the range of 13%-13.5%, down from the earlier projection of 13%-15%. However, achieving this growth would be considered strong given the challenging market conditions. Growth is expected to be driven by the Communication, Energy & Utilities (E&U), and Transportation segments, supported by a healthy deal pipeline valued at $183.9 million.

Demand strength is expected to persist in the medium term, with the US market relatively better positioned compared to the UK and Europe. Decision-making processes are anticipated to accelerate as the macro environment stabilizes.

Despite some de-growth observed in certain verticals, such as Transportation, new growth areas and the majority of the verticals are expected by the analyst to witness recovery moving forward.

Price Action: Cyient’s share price was down 0.48% to trade at ₹1,996.80 on Tuesday afternoon.

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