Cyient FY21: Make In India Saves The Day

/ May 5, 2021/ Unknown

Cyient – Thank You Make in India

The Make in India program saved the day for Cyient in FY21. The company’s revenues in its short-series manufacturing unit, DLM, were up by 28% to USD 96m. Within DLM, the Aerospace & Defense industry drove growth (+84%); thanks, we Make in India. Cyient also says clients now consider India as an alternative to China. As a result, DLM had its best-ever year, as far as we can recall. DLM’s profitability also increased on the back of higher volumes. Its EBIT margin reached 5.7%: this is a major improvement. Indeed, in FY20, DLM had a slightly negative EBIT margin. Five years after its acquisition, the former Rangsons Electronics is finally proving its worthiness. Its next challenge is to get back to a decent profitability level. However, DLM is definitively on the right path.

Services Suffered from Commercial Aviation Exposure

Meanwhile, Cyient’s core business, Services, suffered (-16.2%) from its exposure to A&D’s commercial aviation exposure. A&D was down by 33% in FY21 to revenues of USD 125m. Communications, now Services’ largest vertical, was stable (+2.5%). All other sectors declined, with Semiconductors and Medical Devices showing, unsurprisingly, some stability (respectively -3.7% and 0.2%). Cyient continues its transformation to diversify its heavy client concentration.

FY22: Continue Growth in DLM and Better Comps for Services

Now is time for the rebound for the company. After a 12.0% revenue decline in FY21, Cyient expects double-digit revenue growth at cc in FY22.

DLM (+20% at cc) will continue to outperform Services, despite a yoy drop in Q1 FY22. The business will continue its profitability journey, with a 200 bps improvement in its EBIT margin. Services should also grow by double-digits, largely thanks to better comps. Its EBIT margin should also improve by 200 bps.

Cyient, like its peers, is emerging quickly from the pandemic crisis and will be back to growth in FY21. However, the challenges of the firm did not start with COVID. Several quarters before the pandemic, the company had suffered from its heavy client concentration, especially in Aerospace and Communications. It is not quite clear yet if Cyient has diversified its client base and de-risked its activities.

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