Cyient shares surged over 9 percent on Friday after the firm posted a bigger-than-expected rise in its fourth-quarter revenue driven by a strong services deal pipeline.
The stock rose as much as 9.4 percent to its intra-day high of ₹1,194.
The company's consolidated revenue from operations rose 48.3 percent year-on-year (YoY) to ₹1,751 crore in the March quarter, beating analyst estimates of ₹1,729 core, according to Reuters.
Meanwhile, its net profit jumped 5.5 percent YoY to ₹163 crore in the quarter under review as against a profit of ₹154.2 crore in the year-ago period. Its net profit was also higher than Street expectations.
The company also said that it expects consolidated services revenue growth in the range of 15-20 percent (YoY) on a constant currency basis for FY24.
"We won five large deals in the core services (segment) with a strong total contract potential of $185.1 million this quarter," said Krishna Bodanapu, executive vice chairman and managing director at Cyient.
The positive results of the firm come after IT majors TCS and Infosys reported weaker than estimates earnings in Q4.
Post the earnings, brokerage house IDBI Capital has retained its buy call on the stock with a target price of ₹1,265, indicating an upside of 16 percent.
"Cyient reported strong organic growth in services revenues in Q4FY23 led by transport vertical. Going forward, the company has guided services revenue growth of 15-20 percent and 100-200 bps improvement in margins. We have conservatively built-in revenue growth of 17 percent due to macro uncertainty and possible delay in revenue conversion. The growth in revenues is expected to be driven by strong double-digit growth in aerospace, communication and inorganic contribution. Further, we have taken the lower end of margin expansion of 100 bps improvement in services margins. Despite this conservative assumption, our EPS has been upgraded by 5 percent in FY25E," rationaled IDBI Capital.
In addition, it expects services revenues to grow 13.3 percent CAGR over FY23-FY25E led by a revival in the aerospace vertical. The growth is expected to be driven by double-digit growth in aerospace, communication, and sustainability segments.
It further noted that the company has seen a healthy expansion in margins on normalised basis up 136 bps QoQ led by price hikes and volume impact. Going forward, the company expects a 100-200 bps improvement in service margins. However, IDBI has conservatively built in 100 bps improvement in FY24E EBIT margins to 13.7 percent in FY24E and then further improvement of 30 bps to 14 percent in FY25E led by higher utilisation, pyramid and automation.