Categories Concall Highlights, Earnings, Technology

Cyient Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Cyient Ltd (CYIENT) Q4 FY24 Earnings Concall

  • Industry Trends
    • China Plus One strategy driving new opportunities in regions like India.
    • Significant technology changes across sectors like EV, communications, AI, Industry 4.0.
    • Overall EMS industry is massive ($1 trillion) with 5.4% CAGR.
    • High-mix, low-volume segment focused on mission-critical electronics is growing rapidly at 30%.
  • Business Growth
    • Strong year with significant growth.
    • Inaugurated new facility in Bangalore for precision machining.
    • Expanded with new manufacturing facility in Mysore for increased capacity.
    • Growth driven by working with industry-leading OEMs.
    • Added new client logos.
  • Investments & Capabilities
    • Invested in Build to Spec capabilities for design and manufacturing.
    • Appointed a CTO to drive strategic programs.
    • Strengthened supply chain solutions and talent.
    • Enhanced go-to-market and sales capabilities.
    • Received industry recognition and awards.
  • Strategy and Future Outlook
    • Focus on large deals with OEMs in high-value segments.
    • Leverage integrated design and manufacturing offerings.
    • Pursue inorganic strategy for capability, capacity, and geographic expansion.
    • Explore opportunities in sectors like EV, automotive, and communications.
    • Continue core focus on aerospace, defense, medical, and industrial sectors.
    • Utilized IPO proceeds to clear debt, fund working capital, and capex.
    • No deviations from stated objects in RHP.
    • Planned investments in headcount to strengthen team for growth.
  • Financial Performance
    • Q4 revenue grew 30.5% YoY to INR 361.8 crores.
    • Q4 operating profit grew 19.2% YoY, with 10.5% EBITDA margin.
    • Q4 PAT grew 80.7% YoY to INR 22.7 crores, with 6.3% margin.
    • FY24 revenue grew 43.2% YoY to INR 1,191.9 crores.
    • FY24 operating profit grew 26.5% YoY, net profit grew 92.9% YoY.
    • Fixed asset turnover ratio improved from 6.8x to 8.6x.
  • Operational Metrics
    • Q4 order backlog at INR 21,705 million, down INR 262 crores YoY.
    • Q4 net working capital at 79 days, lowest in four quarters.
    • Reduced DSO to 57 days and inventory holding by 20 days in Q4.
    • Generated positive free cash flow of INR 129 crores in Q4.
    • Average net working capital over 100 days in FY24, aim to bring it to 90 days.
    • FY24 free cash flow negative INR 104 crores, manageable given high growth.
  • Industry and Product Mix
    • Higher revenue share from aerospace and defense industries in FY24.
    • Increased share of PCBA business in FY24 revenue mix.
    • No preference on product mix, driven by customer programs and preferences.
    • Objective to maintain and enhance margins regardless of product mix.
  • Order Backlog
    • Order backlog declined to INR 21,705 million, down INR 262 crores YoY.
    • Order win in FY24 was weaker, half of FY23.
    • Long-term framework agreements in place, new orders expected to fructify.
    • Pipeline is robust, key strategic programs to be announced.
    • Expecting solid updates on order backlog within the next quarter.
  • Customer Advances
    • Customer advances as a percentage of sales have come down.
    • Execution of large Bharat Electronics order consumed advances.
    • Concept of customer advances reducing as supply chain eases.
    • Corresponding offset expected with lower inventory levels.
  • Margin Expansion
    • As mix shifts from BEL orders to higher-margin orders, margins to expand.
    • BEL to remain a key client, but lower percentage of overall mix.
    • Margin expansion potential as higher-margin orders get executed.
  • Outlook
    • Maintained guidance of 30% CAGR over a three-year period.
    • No specific revenue or margin guidance provided for FY25.
    • Line of sight for margin improvement from current levels on a full-year basis.
    • Potential sequential softness in margins for first couple of quarters due to business seasonality.
    • Around 45% of revenue comes in H1 and 55% in H2.
    • Margins expected to improve as higher-margin orders get executed.
    • Target ROCE of 15% in a couple of years, 25% in steady state (5 years).
  • Revenue Mix
    • Exports contributing two-thirds of revenue, domestic one-third.
    • Higher growth traction seen in exports business.
    • Strong 78% growth in defense segment driven by Middle East and India opportunities.
  • IPO Funds Utilization
    • Utilized around INR 100 crores for working capital requirements in FY24.
    • Of the remaining IPO proceeds, around half earmarked for future working capital needs.
    • Rest to be utilized for capex, general corporate purposes, and M&A.
    • Working capital cycle expected to be maintained at 90-100 days in FY25.
  • Healthcare Segment Outlook
    • Currently a smaller segment, but good growth outlook.
    • Working on key opportunities, significant upside potential.
  • Bharat Electronics Order
    • $55 million order backlog remaining from initial $95 million order.
    • Margins substantially lower compared to rest of the business.
    • Key contributor to declining customer advances as order gets executed.
  • Revenue Mix Outlook
    • Targeting 25% revenue share each for medical and industrial segments in 2-3 years.
    • Aerospace and defense to contribute around 50% of revenue in that timeframe.
    • Diversification from current high exposure to aerospace and defense.

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