Cyient locked in 10% lower circuit on lower-than-expected Q4 results

Share of Cyient were locked in the 10 per cent lower circuit band, at Rs 209, on the BSE on Friday at 01:28 pm after the company’s March quarter (Q4F20) performance came below expectations on, both, revenue and margin terms largely due to the impact of Covid-19.

A combined 2.65 million equity shares have changed hands on the counter till the time of writng of this report, and there were pending sell orders for around 82,000 shares on the NSE and BSE. The stock of the IT consulting and software firm was trading close to its 52-week low of Rs 200 touched on April 28, 2020.

The company’s revenue for the quarter stood at $149.2 million, 3.7 per cent lower quarter on quarter (QoQ) in constant currency terms. In rupee terms, consolidated revenue during the quarter under review declined 2.9 per cent at Rs 1,074 crore on sequential basis.

The consolidated net profit, too, decreased by 30.4 per cent to Rs 75.4 crore from Rs 108.3 crore in previous quarter. The significant impact on net profit due to lower other income and lower EBIT (earnings before interest and tax).

Furthermore, gross margin at 33.5 per cent was lower by 248 bps QoQ with significant impact due to the shortfall in revenue. The design-led manufacturing (DLM) gross margin at 13.3 per cent was hit due to changes in revenue mix. Lower utilisation during the quarter due to Covid-19 preparedness also impacted the margin. EBIT margin was lower by 120 bps mainly due to a volume drop.

The management expects a sequential revenue decline of 15-20 per cent in April-June 2020. Thereafter, it expects a recovery on the back of field work restrictions being eased, and anticipated recovery in Communications and E&U. The management expects field work restrictions to impact near-term prospects (1HFY21) in verticals like Communications, Energy & Utilities and Geospatial. Cyient anticipates some of these verticals to recover over 2HFY21 as lockdown/field work restrictions ease out.

Motilal Oswal Financial Services have cut its EPS estimate for FY20-22E by 31-33 per cent due to the worse-than-expected results and commentary. "Given the continued execution challenges at the company, dented visibility on earnings recovery and the one-off trail, hope of a re-rating may be too optimistic," the brokerage firm said in result update.