Extending their upward trend, shares of Cyient rallied over 2.5% to mark a new 52-week high of ₹1,026 apiece during Monday's trade. The stock has been on a bull run since November last year and has gained around 40%, growing from ₹730 to the current level of ₹1,020.
In the past three years, the stock's value has surged by an impressive 351%, rising from Rs. 226 to Rs. 1,020 apiece. This year so far, the stock has produced a remarkable return of 25.77%, while the Nifty IT index has fallen by 1.55% in the same period.
Cyient is a small-cap IT stock with a market cap of over ₹11,250 crore. The company is engaged in providing global technology services and solutions, specializing in geospatial, engineering design, IT solutions, and data analytics.
Global brokerage firm Morgan Stanley has picked Cyient as one of its favourite IT stocks. The firm has upgraded the stock's rating to ‘overweight’ from ‘underweight’ and raised its price target to ₹1,100 from ₹730 earlier.
Morgan Stanley said that Cyient's company-specific initiatives are helping the margin, while carving out the products business will lead to value unlocking.
Earlier in February, domestic brokerage firm Motilal Oswal maintained its optimistic view on the stock and retained its "buy" call with a target price of ₹1,170 apiece, citing the stock's reasonable valuations.
The brokerage noted that the company's operating performance has inherently been subdued over the past several years as a few of its growth engines remained weak and underperformed those of its peers. In addition, execution challenges have marred the company’s overall topline growth.
However, the brokerage highlighted that the challenges under the Aerospace and Communications segments have bottomed out, and these segments are likely to improve and stimulate overall organic growth.
Additionally, the company's revenue growth should also amplify, led by inorganic components and a gradual recovery in its design-led manufacturing business, it said.
"The company aspires to reach a $1 billion revenue run rate for the consolidated entity with 15.0–15.5% margins by 4QFY24. To meet this target, the company must deliver 5% CQGR over the next five quarters along with a 200-bps margin improvement at 4QFY24 exit compared to 12.9% in 3QFY23, which we consider as a bull case scenario, said the brokerage.
"The bull case scenario is seeing an EPS upgrade of 3% and 15% over the base case in FY23E and FY24E, respectively. The revised EPS translates into P/E multiples of 18x and 12x EPS of ₹53.7 and ₹78.7, respectively," the brokerage added.
If the bull case scenario turns out to be positive, Motilal expects the stock to scale up to ₹1,330 levels.
With the acquisition of Citech, the company has made its way by adding the new vertical line (Plant & Product Engg.) to its diversified business mix while expanding its footprint in the Nordic countries. The acquisition is likely to add more than $100 million to its top line in FY24, as per the brokerage.
15 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.