This Midcap IT Sector Stock Showing Upside Potential, ICICI Direct Says Buy For Robust Returns

Brokerage firm ICICI Direct has a buy on the stock of Cyient Ltd. (Cyient). It claims a potential upside of up to 15% with a target price of Rs 1,020/share. It is a midcap IT Software company with a market capitalisation of Rs 9,836.79 crore. Cyient offers engineering & development services to aerospace & defence, transportation, E&U, communication and others. Cyient has 300 customers across 14 countries. Net debt free and healthy cash flow with OCF/EBITDA ~80%.

Stock outlook and performance

The stock's current market price on NSE is Rs 890.40/share, up 1.47% from the previous close. The stock recorded its 52 week high on 13 Jan' 2022 at Rs 1,051.85/share and the 52 week low on 26 May 2022 at Rs 720/share, respectively. It has given 7.24% in the last 1 week, 5.02% in the last 1 month and 17.17% in the last 3 months, respectively. The stock has fallen 13.22% in the last 1 year. It gave 97.47% in the last 3 years and 52.83% in the last 5 years, respectively.

Q3FY23 Results

Cyient reported strong Q3 results. Services grew 11.9% QoQ in CC terms with organic contribution of 3.7%. Normalised services EBIT margin without acquisitions & exceptional items increased ~190 bps to 15.1%. Order intake increased 83.4% QoQ & 18.2% YoY to US$237.1 million (mn).

Buy for a target price of Rs 1,020/share

Cyient's share price has grown by ~1.4x over the past five years (from ~Rs 581 in January 2018 to ~Rs 876 levels in January 2023). "We maintain our BUY rating on the stock. We value Cyient at Rs 1020 i.e. 15x P/E on FY25E EPS," the brokerage has said.

Key triggers for future price performance

• Acquired entities to provide diversification, which, in turn, is expected to provide growth, looking at US$1 bn revenues in FY24.
• Improved demand from large deals, healthy order book and organisation restructuring to accelerate growth.
• Strategic buyout a multi-year arrangement with an auto major.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.