Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cyient Ltd (BOM:532175, Financial) signed a strategic partnership with Deutsche Aircraft Group for detailed design and manufacturing of a new turboprop aircraft fuselage.
- The company secured a new long-term relationship with Airbus for cabin interior displays and cabin installation display systems, lasting 15 years.
- Cyient Ltd (BOM:532175) was ranked as a leader in ER&D services in North America and Europe, recognized for innovation across multiple industries.
- The company debuted in data analytics and AI leadership rankings, showcasing its capabilities and industrial expertise.
- A final dividend of INR18 per share was announced, bringing the total to INR30 per share, the highest dividend ever paid by the company.
Negative Points
- Q4 revenue was lower than expected, with a slight de-growth of 0.1% in rupee terms and 0.5% in constant currency.
- The communications business recovery was back-ended during the quarter, impacting overall performance.
- Despite a solid EBIT margin of 16%, revenue growth was flattish, marking the first non-growth quarter after seven consecutive quarters of growth.
- The transportation vertical experienced a decline of 1.5% QoQ, reflecting ongoing challenges in this sector.
- The company provided a cautious revenue growth guidance of high single digits for FY25, reflecting uncertainties in the macroeconomic environment and customer project deferrals.
Q & A Highlights
Q: My first question is with respect to the revenue guidance. How should we think about this guidance spreading out across verticals? Which verticals would you expect to do the heavy lifting for the year and which verticals would relatively lag?
A: We continue to see momentum from sustainability, aerospace, semiconductors, and automotive. We do expect connectivity to come back to growth during this year as compared to what we have seen in '24.
Q: With respect to the quarterly trajectory of this guidance, should we think about this year being a back-ended growth year or will the growth be equally spread across quarters?
A: We do expect some softness in the early part of the year. It depends on how things pan out, but we expect the rest of the year to perform well.
Q: Given that this year is expected to have high single-digit growth, how should we think about the medium-term guidance from a three to five-year perspective? Does that also undergo a change or does it remain intact?
A: We believe our medium to long-term growth prospects are intact. We expect significant investments in areas like energy transition from Europe and the US, and potential growth opportunities in the Middle East.
Q: What are the areas of investments for growth that we will be focusing on this year?
A: We will continue to invest in technology that accelerates revenue growth and margin expansion. This includes organic investments in technology and capabilities that align with our strategic goals.
Q: My question is for Karthik. Back-ended guidance never works for the industry. Given the challenging environment and past guidance misses, what gives you the comfort to provide such guidance again?
A: Many customer conversations indicate that deferred projects are starting to materialize. We see the trajectory for the next year as a growth year based on the momentum in various segments.
Q: What are the underlying assumptions and fine-tuning done to ensure a better outcome on your guidance this year relative to last year?
A: Last year, we did not anticipate the drop in connectivity and rail. This year, we have mapped out based on order backlog and customer patterns, and we believe our estimates are more accurate.
Q: Can you explain the decline in headcount in Q4 and how should we see it in FY25?
A: The decline was due to aligning headcount with demand and not replacing attrition in Q4. We expect headcount to grow in FY25 as demand ramps up.
Q: What are the risks that could cause the high single-digit growth to drop to mid-single digits over the next three to six months?
A: The key variables are the supply catching up with demand in aerospace and the conversion of connectivity contracts into revenue. We will have a clearer picture after Q1.
Q: Can you break down the growth between organic and inorganic for FY24?
A: The integration of acquired entities is complete, and they are now part of our ecosystem. We do not have a separate view of organic versus inorganic growth as they are fully integrated.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
