Cyient Q2FY18 Concall Summary


 Financial Highlights

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  • Revenue for Q2FY18 were highest ever wth$150.1 million with a strong quarter-on-quarter growth of 6.7% on a year-on-year growth of 10%
  • For services business, the revenues stood at $134.3 million, which again is the highest ever with a robust QOQ growth of 4.2% and a YOYgrowth of 9.2% in U.S. dollar terms
  • The Design-Led Manufacturing business delivered double-digit growth at 33.7% QOQ with revenues of $15.8 million
  • Dependence on America as the largest geography is also coming down with the growth from EMEA and Asia Pacific
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  • The operating profit was highest ever at Rs.140.9 Crores with a QOQ growth of 21.5%
  • Operating margin expansion is of 181 basis points QOQ and 56 basis points YOY
  • The wage hike has been around 150 basis points
  • The cross currency impact QOQ is about 1.6%and the constant currency number is 5%
  • The 181 bps is mainly coming from the operations both in terms of improvement in utilization, pyramid and also the improvement in margins for the on-site jobs
  • SG&A absorption has a combination of cost control as well as the absorption was better
  • Net profit for the Q2FY18 is at Rs.111.4 Crores, which is the highest ever with a quarterly growth of 26.9%
  • The cash and cash equivalents continued to remain healthy at Rs.986.7 Crores
  • DSO for the company is 75 to 80 days
  • The conversion is 41% in H1, and Cyient is trying to take this again upward of 45% conversion in H2

Tax rate 

  • Special Economic Zones are helping in reduction of Tax rate
  • On QOQ basis the Tax rate has come down by 300 basis points, because the revenues coming from the geographies in higher proportion where taxes are lower
  • The effective tax rate will be somewhere around 26%-28% depending on the final mix and the traction in the Special Economic Zones


  • The attrition came down to 16.8% which is the lowest ever in the last 15 quarters


  •  Company declared an interim dividend of Rs.5 per share, the highest ever for an interim dividend
  • The dividend policy is revised to pay out 40% from the current payout ratio of 30%, barring unusual circumstances


  • Cyient continues to support 25 government schools, supporting an education of underprivileged children
  • As a partner initiative to increase IT literacy, one more Cyient digital learning centre have been added, taking the total of 55
  • The company has collaborated in Haritha Haram, a tree plantation program of Telangana government and planted more than 5000 trees as a part of this initiative

Customer base:

  •  The million-dollar customers improved quite a bit from 57 to 65
  • One of the good things that happened in the last two years is the quality of customers has significantly improved. So all of these customers has the potential to be $5-plus million, $10-plus million kind of customers


  • Certon was awarded a Platinum Premier ranking as a part of the Trusted Supplier Program of Rockwell Collins
  • Cyient was also awarded with Boeing Test and Evaluation Excellence in Quality Award in the category of Use Standard Work for Completing 737-7 Project

Employee Costs:

  •  A lot of the employee addition is offshore rather than on-site and a large proportion of the additions are also fresh college graduates
  • The cost that is associated with them as a proportion comes down

Sales and Marketing:

  • The sales and marketing spend this quarter was around Rs 60 Crores
  • Cyient’sfocus on sales and marketing is tocontinue to spend about 6.5% to 7%

Investments and M&A

  • Cyient has a signed  a definitive agreement to acquire B&F Design Inc., a tooling and precision engineering company
  • Closure is expected hopefully by the end of the year
  • An agreement to divest Cyient's 49% stake injoint venture with Pratt & Whitney on the Island of Puerto Rico
  • This transaction will also close some time in Q3FY18
  • Cyient also entered into an agreement with Elpis, and licensed a intellectual property to create a solution around it
  • The solution helps to maintain assets on a utilities network, which brings a lot of automation into the process
  • A UTC selling 12.2% of its stake in Client during the current quarter


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  • The gains on forward contracts are Rs.161 million in Q2FY18
  • The other income, increased from Rs.351 million to Rs.406 million, mainly it is driven by the notional restatement of the items on the balance sheet
  • The company continues to be hedged for 70% of the net inflows for the next 12 months
  • The gap between the current forward position versus the exchange rates prevailing now or the spot rates or the forecasted rates, forward contract gains in the next 12 months would be $3.6 million to $5 million


  • While the YOY growth was a little bit benign, the QOQ  growth is at 3.2%
  • In the last 5 years the CAGR in the Pratt business is about 10% and the momentum is absolutely there
  • Pratt is cutting down the number of suppliers, and as Cyient remains on top of the list for remaining suppliers, more consolidated business is expected
  • Pratts civil aerospace has slowed down, but their military aerospace is picking up

Communication Industry:

  • The Communication Industry obviously has had a fantastic run and that is going to continue forward because of all the fibre rollouts and the NBN program in Australia, CAF-II in America

U&G Business Unit

  • The H1 was flat, but H2 is anticipated to be strong
  • Cyient have the pipeline, the orders and work has started and won some really good deals

Rail Transportation Business:

  • The H1 was strong with a growth rate of almost 30% over last year
  • Cyients clients are making large scale investments in rail transport and that would be good for Cyient
  • Alstom and Siemens, which are,the third and the fourth largest rail transportation companies, have announced a merger, so now they have become the second largest rail transport company
  • During the transition of mergers, Cyient does not necessarily see any change in how business works because, ultimately they have obligations to their end customers

Industrial, Energy and Natural Resources and Infrastructure:

  • Due to soft demand the year was flat and that will continue till the rest of the year
  • There is some new spend in new technology with things like analytics

Semiconductor industry:

  • The Q1FY18 was very good and Q2FY18 was flat and even sustaining that took some work

Medical business:

  • The macro dynamics in the industry are such that Cyient’s services and value proposition become quite compelling
  • At least from a pure percentage point of view, that is the best growth

Design Led Manugscturing Unit

  •  Cyient had a very strong growth in Q2FY18 and Q2 was expected to be a strong quarter and it is a strong quarter
  • Cyient is continuing to work on pipeline, so as to not get affected by cyclicality, at least in FY2019
  • DLM will break even at operating level in terms of investments i.e the margins of 5% to 6% is all going back into investments