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Cyient Ltd announces Q2 FY2019-20 results

Posted On: 2019-10-17 17:56:03

Financial Highlights for Quarter

- Consolidated revenue at $164.2 Mn; growth of 4.9% QoQ and de-growth of 2.8% YoY
- Services revenue at $140.4 Mn; growth of 1.8% QoQ (2.6% in CC) and de-growth of 3.8% YoY
- DLM revenue at $23.8 Mn; growth of 27.4% QoQ, 3.9% YoY
- Normalised EBIT* excluding one-offs and long term investments at Rs. 1,420 Mn
- EBIT margin excluding one-offs and long term investments at 12.3%,up 105 bps QoQ
- EBIT margin for services excluding one-offs and long term investments at 14.3%, up 158 bps QoQ
- Profit After Tax at Rs. 985Mn for the quarter; growth of 8.8% QoQ and de-growth of 22.5% YoY primarily driven by lower EBIT and lower other income
- Declared an interim dividend of Rs. 6/share

- Despite the volatility in major currencies, the company continues to adhere to a consistent Fx policy of hedging ~70% for next 12 months for major currencies (USD, GBP, EUR, CAD and AUD)
- On the current forward contracts, the company has following position for the next 12 months at current spotrates:
- Outstanding Forward Contracts as on 30th Sep'19 is ~ $ 135 Mn
- If the spot rate remains at same level (as at 30th Sep'19), forex gain on current forward contracts could be ~$ 8.5 Mn (Rs. 601 Mn)

- Other income is Lower by Rs. 18Mn (-6.4%) QoQ primarily due to lower Treasury income by Rs. 20Mn, forward contract gain of Rs. 174 million partly offset by unrealised FX loss of Rs. 56 million
- The Export incentives have right shifted to H2 FY20
- For the full year we expect Other Income to be marginally higher than FY19

- Consolidated EBIT at 9.6% ; up 35 bps QoQ.
- Benefits of cost optimization (129 bps), volume impact (73 bps) and operational efficiency (55 bps) offset by wage hike (107 bps) and one time restructuring costs (85 bps)
- YoY EBIT improved by 52 bps on normalised basis forthe group

- Cash and cash equivalents at a healthy levels of Rs. 8,641 Mn
- For the quarter, the normalised cash flow conversion stood at 51.1%.
- We continue to focus on improvement in FCF conversion through focus on collection and other working capital management

Commenting on the results, Mr. Krishna Bodanapu, Managing Director and Chief Executive Officer, said Our Q2 FY 20 results were in line with our commentary, we recorded a revenue of $164.2 Mn a growth of 4.9% QoQ or 5.7% in CC while a decline of 2.8% YoY or 1.2% in CC. In constant currency, our revenue for the quarter would have been $165.4Mn which is the quarterly average of last year's revenue. Our services business grew by 1.8% QoQ predominantly driven by growth in Energy and Utilities and Portfolio business units and offset by decline in Aerospace & Defense and Semiconductor, IoT and Analytics (SIA) business units.

Our Design led Manufacturing (DLM) BU grew 27.4% QoQ driven by growth in key clients. Our EBIT at 9.6% was 35bps higher QoQ driven by lower SGA spend, operational efficiency improvements, increase in offshoring and better revenue mix. Excluding the one off spends, the EBIT would have been 105 bps higher QoQ and our services EBIT margin would have been higher by 158 bps QoQ.

This quarter we also witnessed an increased traction in our solutions business with key wins across solutions such as Additive Manufacturing, Intelligent Data Management System (iDMS), and Internet of Things (IoT) to name a few. This instills confidence in our S3 strategy and execution and as a company we will continue to invest in key strategic areas in line with our strategy.

Commenting on the results, Mr. Ajay Aggarwal, President & CFO, said, "We continue to make steady progress despite the near term headwinds. The quarter performance was in line with our expectations with 4.9% QoQ growth in dollar revenue and 10.5% QoQ growth in EBIT. Excluding the one offs (non-recurring costs) and long term investments our EBIT margins stood at 12.3% and the free cash flow conversion stood at 51%. DSO is lower by 9 days QoQ and stood at 95 days.

Our cost optimization initiatives are bearing fruit and we expect our margins to further strengthen in FY21 where the full benefits of improved operational efficiency will be visible. We also declared an interim dividend of Rs. 6.0/share.

We are confident of delivering a steady growth in our services business for the rest of the year. We remain strongly focused on growth, improvement in operating efficiencies and cash generation and thus maximizing the value for our shareholders.

Shares of Cyient Limited was last trading in BSE at Rs.448.25 as compared to the previous close of Rs. 453.2. The total number of shares traded during the day was 8565 in over 675 trades.

The stock hit an intraday high of Rs. 460 and intraday low of 441.55. The net turnover during the day was Rs. 3834396.

Source: Equity Bulls

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