NU Investors Technologies Pvt Ltd

Retail Research
24 Sept, 2024

Company Name: Cyient DLM Ltd. BSE CODE: 543933 NSE CODE: CYIENTDLM
Sector: EMS/Industrial Products

CMP: ₹694 | Target Price: ₹982 | Potential Upside: 41.5%

9 months - 12 months
Company Data
Our Recommendation: We initiate a BUY rating on
CYIENTDLM and value its EMS business at 52x FY26E EPS at Market cap: ₹5510 cr
PEG ratio of 1 as we believe the company will grow exponentially
Book Value ₹115
due to sectoral boom and will showcase robust performance
inline with industry to arrive at a target price of Rs. 982/share. 52W High/Low ₹884/580
The TP implies an upside of 41.5% from the CMP.
P/B Ratio 6.07
P/E Ratio 82.9
About Company: Cyient DLM is a leading electronics system
design and manufacturing player, which provides system Industry P/E Ratio 75.7
design, integration, testing, and manufacturing of electronic
components and subsystems for original equipment
manufacturers (OEMs) in the aerospace and defense
Financials
sectors and other high-tech engineering segments. It has Standalone
customers in India, Europe, North America, China and Particulars FY23 FY24 FY25E FY26E
Japan.
Sales 832.00 1,192.00 1,585.36 2,108.53

Investment Rationale: Expenses 744.00 1,081.00 1,410.97 1,866.05

Government’s positive support in the sector to drive
Operating Profit 88.00 111.00 174.39 242.48
orderbook
OPM % 11% 9% 11% 11.5%

Electronics Market in India (US$ billion) Other Income 6.00 28.00 24.00 24.00

Interest 32.00 34.00 44.00 44.00

600
540
Depreciation 19.00 22.00 23.00 23.00
500

Profit before tax 43.00 82.00 131.39 199.48

400
Tax % 26% 25% 25% 25%
300
215 32.00 61.00 98.54 149.61
Net Profit
200
145
EPS in Rs 6.00 7.70 12.44 18.89
100

FY 16 FY 19 FY 25 ShareHolding Pattern
Source:ibef.org Dec 2023 Mar 2024 Jun 2024
Promoters 66.66% 66.66% 66.66%
FIIs 6.32% 7.04% 5.14%
• As per IBEF, India is committed to reach US$ 300 billion
worth of electronics manufacturing and exports by DIIs 11.22% 12.56% 17.44%
2025-26. Government has shown good support from a Public 15.80% 13.73% 10.75%
policy perspective for the industry, The
production-linked incentive (PLI) schemes will provide Price History, 1-Year (Rs)
companies opportunities to establish manufacturing 26000 900

plants in India. 25000

850

24000

• Cyient DLM is positioned as an ESDM player providing

800
23000

products for Defense and Aerospace, Industrials and

750
22000

Medical Tech. The demand outlook from the customer

21000 700

20000

segment looks solid too.

650

19000
600
18000

550
17000

16000 500
Sep 18 Oct 18 Nov 18 Dec 18 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18
2023 2023 2023 2023 2024 2024 2024 2024 2024 2024 2024 2024

Nifty 50 Cyient DLM

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 ADVANTAGE INDIA

ROBUST COMPETITIVE POLICY INCREASING

DEMAND ADVANTAGE SUPPORT INVESTMENTS

India has strong design and R&D India committed to reach US$ The production-linked incentive In March 2024, the Cabinet
capabilities in auto electronics 300 billion worth of electronics (PLI) schemes will provide approved a massive Rs. 1.26
and industrial economics. India is manufacturing and exports of companies opportunities to trillion (US$ 15.2 billion)
the second-largest US$ 120 billion by 2025-26 establish manufacturing plants investment in three
manufacturer of mobile phones in India semiconductor plants, signifying
in the world and will be the India is home to considerable India's technological progress.
fifth-largest consumer of talent for electronic chip design Maior Government initiatives
electronic products by 2025. and embedded software. such as 'Digital India', 'Make in India and Taiwan plans a US$ 7.5
India' and supportive policies billion chip plant deal, potentially
In FY24, the exports of electronic including favorable FDI Policy for boosting India's semiconductor
goods was recorded at US$ electronics manufacturing have manufacturing with anticipated
29.11 billion as compared to US$ simplified the process of setting tariff reductions on components.
23.57 billion during FY23, up manufacturing units in India.
registering a growth of 23%.

Source: Investor Presentation Q1FY25

Aerospace & Medical and Industrial

Defense Healthcare

Strengthened the segment with few new Strengthened sales focus on expand Focused on expanding into Industrial
logo wins and strategic wins in key clients presence in Medical segment segments of our key clients

Focus on building ITAR capability to be Added a new logo in the Medical New logo added to strengthen the
able to expand to US Defense segment segment, focus on building a strategic engagement in this segment, our focus
relationship with the client will be to build the relationship
Focus on further strengthening our
strategically
presence in India Defense segment Focus on expanding on other medical
customer by leveraging our Cyient Continuing to strengthen capabilities in
Services relationship Industry 4.0

Source: CyientDlm Q1, FY25 Investors Presentation

Strong revenue growth projections

• Management guidance of 30% Revenue increase with EBITDA margins of 10-11%.
• The company is adding new clients in this space and expects growth to increase.
• The company has added four new global customers in 1Q

COMPANY’S GROWTH STRATEGY

Strengthen Inorganic New Industries

Current Expansion New Geographies
Business

Large Deals: Building strategic Target inorganic expansion strategy for: New Geographies: Look to tap growing
engagements through large deals. • Client proximity and geographic footprint EMS destinations

Focus in India Defense: by strengthening • Accessing target clients New Industries: Strategize entering
Defense sales team • Expanding our capabilities disruptive industries like Electric vehicles.

Build to Specification: Strengthen B2S Looking for acquisition in NAM, EMEA

offerings across verticals

Source: CyientDlm Q1, FY25 Investors Presentation

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Well balanced mix of Revenues from growing sectors

INDUSTRY PRODUCT CATEGORY MIX

2% 5%
10% 2%
26% 42%
19%
5% Aerospace PCBA Export
Defence Box Build Domestic
Industrial Cables
Med Tech Mech &
Others
Rail

57% 74% 58%

Defense segment YoY growth at 79.6% PCBA business share continues to Export share of business continues to
remain high across industry segments be higher from increased demand in
Aerospace Segment YoY growth at
Aerospace &
78.1% Precision Machining Revenues are
included in Others (0.8%) Defense customers Domestic business
Demand drop led to degrowth in
Mix of 42% is primarily contributed
Industrial of 81.6% YoY, while Med-Tech
from Defense segment
posted 16.1% growth YoY

Source: CyientDlm Q1, FY25 Investors Presentation

Increase in Utilization of Plant Capacity to increase EBITDA Margins

• Currently only 55% of the capacity is utilized, with increase in orders and execution, the company is expected to
operate at optimal levels to increase margin.
• The company expects positive Free Cash Flow in Q2.
• Domestic market conditions are expected to improve which will help the company to increase its order pipeline
and capacity utilization.

Key Risks:
• Lower order inflow and delayed execution will lead to deviation from revenue projections.
• Higher input cost will lead to deviation in margins.
• Working capital requirement is high, delay in receivables will hamper growth..

Analyst Certification
I ,Gaurav Garg, PGDM, author and the name subscribed to this report, hereby certify that all of the views expressed
in this research report accurately reflect my view about the subject issuer(s) or securities. I also certify that no part
of my compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in
this report.. It is also confirmed that above-mentioned Analysts of this report have not received any compensation
from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director
or employee of the companies mentioned in the report.

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RATING SCALE:
Definitions of ratings

Ratings Expected absolute returns over 9 – 12 months

BUY More than 10%

HOLD Between 10% and -10%

SELL Less than -10%

NOT RATED We have forward looking estimates for the stock, but we refrain from assigning valuation and
recommendation.

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NO STANCE We do not have any forward-looking estimates, valuation or recommendation for the stock

Note: Returns stated in the rating scale are our internal benchmark.

List of Research Analyst (Fundamental):

Sr. No Name Designation Sector E-mail

1 Gaurav Garg Research Analyst All Sectors [email protected]

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24/09/2024