Cyient shares tumble 23%, hit 19-month low amid weak Q3 results; analysts lower target price

Stock market today: Shares of Cyient, one of India’s leading IT companies, plunged 23% in intraday trade on Friday, January 24, hitting a 19-month low of ₹1,351 apiece. Today’s drop was the biggest intraday fall for the stock in recent history, bringing its total loss for the current month to 27% so far.

Why Cyient share price crack 23%?

The sharp decline followed multiple brokerage firms trimming their target price for the stock after the company reported a weak set of numbers for the December quarter.

Factors such as slower growth in its Digital, Engineering, and Technology (DET) segment, a cut in revenue guidance for FY25, and the unexpected resignation of its CEO led to substantial selling pressure on the stock in trade.

The company, in its post-market hours filing on Thursday, reported a 31.7% drop in net profit to ₹122.3 crore for Q3FY25, compared to ₹179 crore in the previous July-September quarter. Revenue from operations rose 4.2% sequentially to ₹1,926.4 crore, up from ₹1,849 crore in the September 2023 quarter.

Cyient’s DET segment, which contributes more than 77% to its total revenue, delivered a revenue of ₹1,480 crore, registering a 2.1% sequential growth but a 1.9% year-on-year (YoY) decline in constant currency terms. The EBIT margin for DET stood at 13.5%, reflecting a contraction of 72 basis points QoQ, largely attributed to wage increases and currency headwinds.

The PAT for the DET segment declined 30% quarter-on-quarter (QoQ) and 28% YoY to ₹124 crore, falling short of analysts’ expectations of ₹156 crore. Further, the company revised its FY25 DET revenue outlook, now expecting a de-growth of 2.7% YoY in constant currency terms, compared to the earlier guidance of flat YoY growth.

Additionally, the company lowered its FY25 exit EBIT margin forecast to 13.5%, down from its previous estimate of 16%, citing a shift in the revenue trajectory within the year.

Despite these setbacks, Cyient reported its highest-ever order intake for the DET segment at $312.3 million in Q3FY25, reflecting nearly 100% QoQ growth and a 5% YoY increase. The company also secured 13 large deals in the DET business, with a total contract value of $234.5 million, as per the company’s regulatory filing.

Meanwhile, the company announced that Karthikeyan Natarajan has stepped down as Cyient’s Executive Director and Chief Executive Officer (CEO) with immediate effect. Analysts believe his resignation introduces a period of uncertainty for the company, compounding the already unclear growth and margin outlook for FY26E.

Analysts cut target price on Cyient stock

Following the company’s December quarter performance, domestic brokerage firm Motilal Oswal downgraded the stock to “sell,” citing concerns over a weak Q4 and a seasonally weak H1, which could lead to lower revenue growth for FY26E and a similar impact on margins.

The brokerage cut its earnings estimates for FY25E, FY26E, and FY27E by 13%, primarily due to the FY25 guidance downgrade and uncertainties in key growth areas such as sustainability and aerospace.

The brokerage has a SOTP-based target price of ₹1,350 apiece. Similarly, global brokerage firm JP Morgan downgraded the stock’s rating to “neutral” from “overweight” and slashed its target price to ₹1,750.

The downgrade was driven by the unexpected resignation of CEO Karthikeyan Natarajan, less than two years into his three-year term, as well as the company’s reduced FY25 constant currency revenue growth guidance of -2.7% (from flat earlier) and a lowered Q4 exit EBIT margin guidance of 13.5% from 16%.

JP Morgan highlighted that these developments make it challenging for the company to achieve high single-digit (HSD) growth in FY26 and to recover to 16% margins in FY26.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.