Stocks to buy: Cyient shares have been under consolidation phase for near 6 months. The IT stock has shed around 15 per cent in YTD whereas it has delivered 28 per cent return to its investors in last one year. This one year might look bad from an investor’s perspective, however, if we compare this return with its peers, then the investor might feel disappointed. However, after over 9 per cent growth in FY22 reported by the IT company, Anand Rathi is highly bullish on the counter. The brokerage believes that Cyient share price may go up to ₹1250 per share levels from its current ₹893 levels on NSE, expecting around 40 per cent return in long term.
Highlighting at ease in attrition in recent times, Anand Rathi report says, “Throughout FY22, Cyient exceeded margin expectations, delivering 13.9% in FY22 (10.1% in FY21), translating to 51% EBIT growth. This was achieved by ~2.4% better utilisation and ~5.5% better offshore. The company resumed hiring with Services headcount up 13% in FY22 (-14% in FY21). It expects to more-than-average wage hikes in FY23 to further cool attrition. Overall, FY23 margins are likely at FY22 levels.”
Reckoning the strong guidance of Cyient management; the brokerage says, “DLM is likely to remain under 10%, translating to higher services growth. The company is seeing momentum building up in Aerospace while Communications and Utilities are likely to sustain growth. Tax rates will be higher in FY23 but we expect the company to shift to a lower tax regime by FY24.”
On its suggestion to positional long term investors in regard to Cyient shares, Anand Rathi report said, “The stock quotes at 15x FY24e EPS of Rs59, which seems attractive compared to the sector and considering its FCF yield of around 6 per cent,” adding, “No meaningful change in estimates but we revise our target to Rs1,250 (from Rs1,460), at 21x FY24e EPS, a discount to peers reflecting patchy growth. We retain a Buy.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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