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Cyient DLM: A Defence, Aerospace Business Supported By Strong Tailwinds

Cyient DLM is a leading electronics system design and manufacturing player and in the business from last 30 years. It provides system design, integration, testing, and manufacturing of electronic components and subsystems for original equipment manufacturers (OEMs) in the aerospace and defence sectors and other high-tech engineering segments. The company has three state of art manufacturing facilities in Hyderabad, Bengaluru and Mysore. The company boasts of a vast customer base not only in India but also in Europe, North America, China and Japan.

Financial Snapshot:

Before going in details, let us have a glance Cyient DLM ‘s various financial parameters:                                                                               

Recent Results: Cyient DLM has posted excellent results and when we have a look at the results, EBITDA margins stands at 10.5%. Management has given a guidance of EBITDA growth at 30% CAGR for the next 2-3 years. Profit after tax (PAT) stands at INR 227 million, with an impressive 80.7% YoY growth. Let’s have a look at the numbers on the YoY basis:

⇡ :Indicates increase

Future Plans and Growth Strategy: As per the company concall here are the few notable points which builds confidence in the impressive future prospects of the company:

1.      Focus on large deals with high-value segments.

2.     Build-to-specification services to drive growth.

3.  Inorganic strategy in progress, aiming for acquisitions in the range of $40-100 million.

4.     Continued focus on aerospace, defence, medical, and industrial sectors.

5.    Expectation of solid updates in order intake from existing clients in the next quarter.

6.   Focus on expanding into medical and industrial sectors while maintaining a strong presence in aerospace and defense.

7.    Aspiration to achieve a more balanced revenue mix across different sectors in the next two to three years.

Management and Industry Outlook:

Rajendra Velagapudi is the Managing Director at Cyient DLM. He has extensive operations experience in engineering and manufacturing, having championed numerous continuous improvement processes and supply chain initiatives to improve operational performance and margins. The management is of the opinion that due to the strong tailwinds in the global supply chain and solutions industry and positive growth outlook in the aerospace and defence sectors presents a huge opportunity for the company and company is well poised to be benefitted from all these macroeconomic factors.

Challenges ahead:

The management aspiration to improve margins and achieve a return on capital employed of 15% initially and 25% in the long term can be a herculean task considering the geopolitical tensions. Also with the increase in competition and emergence of new players can further make the task difficult. The decrease in order book to 262 Cr from the last quarter is also another hurdle in their journey of meeting their goals.

Multibagger takeaway:

Due to the positive sentiment towards growth opportunities and strategic initiatives in the pipeline, Cyient DLM can be a great wealth creator in future. Also Defence, Aerospace are the sectors which enjoys the government push and policy support. Considering their impressive run in the past, investors can bet on the company as many positives outweighs the very negatives in the favour of investing in this company.

Disclaimer:

We are not a SEBI registered analyst, please do your own research and consult your financial advisor before taking any investment decision. The prices and data may vary according to the market forces at the time of reading this article.