The battered Cyient Ltd stock is struggling to regain its footing after weak December quarter (Q3FY25) results, an abrupt CEO resignation, and a sharp cut in FY25 guidance sent shares into a tailspin. On 24 January, the stock had plunged 23% as earnings downgrades poured in and concerns over leadership uncertainty deepened.
To steady the ship, Cyient appointed Sukamal Banerjee as executive director and CEO of its digital, engineering, and technology (DET) business on 19 February for a five-year term. In his last role, Banerjee served as the CEO of a digital engineering firm Xoriant, and prior to that spent 27 years at HCL Technologies.
“Cyient is now following in the footsteps of other mid-cap companies, by appointing an experienced leader with strong pedigree to lead its ER&D business,” noted a Nuvama Research report. While Cyient has always had a coveted clientele and strong capabilities, its execution has been patchy, said the Nuvama report, adding that given Banerjee’s experience, it would look to make amends on that.
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Despite his credentials, Banerjee faces a tough turnaround task. JP Morgan analysts see his appointment as a positive but point to key challenges that need immediate attention.
First, Cyient must transition from project-based contracts to longer-term annuity deals that provide better revenue visibility. Second, the company needs to revamp its guidance process to prevent repeated earnings misses or hold off on providing guidance until Banerjee has a clearer grasp of the business outlook.
Third, “Scale up the Auto ER&D practice via acquisitions as it is a missing piece in the portfolio that we think is likely to be the fastest-growing sub-vertical over the medium to long term,” said the JP report dated 20 February.
In the near term, challenges persist. The Q4FY25 outlook remains weak, and a seasonally slow first half could weigh on revenue growth and margins in FY26. Cyient had initially guided for high single-digit constant currency (CC) revenue growth for DET in FY25, but that has now been slashed to -2.7%.
In Q3FY25, Cyient’s DET CC revenue grew 2.4% sequentially, while Ebit margins dropped 72 basis points to 13.5%, pressured by wage hikes and foreign exchange headwinds. The company has also cut its Q4FY25 exit Ebit margin forecast to around 13.5%, down from 16% earlier.
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As things stand, the stock is just 3% above its 52-week low of ₹1,295.35 apiece, seen on 29 January. According to Bloomberg data, the shares trade at 18x FY26 estimated earnings, which is not pricey but has limited triggers in the foreseeable future.