Cyient DLM, a subsidiary of
Cyient, is one of the leading integrated Electronic Manufacturing Services
(EMS) and solutions providers with capabilities across the value chain and the
entire life cycle of a product.
Cyient DLM hase over 22 years of
experience in developing high mix, low-to-medium volume highly complex systems
and it is a qualified supplier to global OEMs in the aerospace and defence,
medical technology and industrial sectors. Contracts with customers who are
located outside India contributed 59.71% of revenue in FY2023.
Solutions offered by the company
primarily comprise: (i) printed circuit board (PCB) assembly (PCBA), (ii) cable
harnesses, and (iii) box builds which are used in safety critical systems such
as cockpits, inflight systems, landing systems, and medical diagnostic
equipment. In FY2023 about 62.6% of revenue come from PCBA, 1.4% from cable harnesses,
32.4% from box builds and balance 3.6% from others.
It provides EMS as Build-to-Print
(B2P) and Build-to-Specification (B2S) services to its clients. B2P solutions
of it involve its client providing the design for the product for which it provides
agile and flexible manufacturing services.
B2S services involve utilizingthe Promoter’s design capabilities to
design the relevant product based on the specifications provided by the client
and manufacturing the product. In FY2023
about 99.8% of revenue comes from B2P.
The company proposes to strengthen its B2S value proposition by
investing in design capabilities to enhance its value addition and increase
ownership in its engagements.
‘Low volume, high mix’ (LVHM) is
a type of contract manufacturing setup, which typically has a very high
emphasis on quality and customization, which changes according to the
requirements of the customer. Typically, it enters into master service
agreements (MSA) with its customers, which are generally for a term of three
years to five years.
It leverages the design
capabilities of itspromoter, Cyient, a leading engineering services provider
with over three decades of domain expertise providing engineering and design
solutions globally, with a focus on multiple industries.
Its manufacturing infrastructure
comprises three facilities spread across two states in India, at Mysuru,
Hyderabad and Bengaluru, with a total manufacturing area of 229,061 square feet
(sft). The Mysuru and Hyderabad facility are primarily engaged in manufacture
of PCBA, cable harnesses and box-builds. While the Mysuru facility is catering
for clients in the aerospace and defence industries, its Hyderabad facility is
catering to clients in non-aerospace and non-defence industries, such as
medical technology and healthcare. Its Bengaluru facility is focused on high
precision manufacturing with production of products such as body valves,
hinges, elbow adaptors, assemblies like bracket assembly, lanyard assembly, and
hinge arm locking assembly.
The company, pursuant to a share
purchase agreement dated September 14, 2022, purchased 2,342,869 equity shares
of Innovation Communication Systems (ICS, and such equity shares, the ICS
Shares) a company primarily engaged in the business of designing and
manufacturing of telecommunication equipment, from its Promoter, aggregating to
15.00% of the paid-up equity share capital of ICS, at a price of Rs 380.73 per
ICS Share and for a total consideration of Rs
89.20 crore , based on fair value as certified by an independent valuer.
The issue and object of the offer
The issue comprises fresh issue
of equity shares aggregating RS 592 crore.
Of the net proceeds from the issue about Rs 291.09 crore will be
utilized for funding incremental working capital, Rs 43.572 crore for capex, Rs
160.911 crore for repayment of borrowings, Rs 70 crore for achieving inorganic
growth through acquisitions and balance for general corporate purposes.
As of March 31, 2023, its total
borrowings amounted to Rs 314.474 crore which also included unsecured loans
aggregating to Rs 153.563 crore from its Promoter.
Strength
Ability to provide integrated
engineering solutions with capabilities across the product value chain.
It is a qualified supplier to
global OEMs in aerospace, defence, medical technology and industrials. In FY2023 about 20%, 37.6%, 16.3%, 25.1% and
1% of revenue from operation come from aerospace, defence, medical technology
and industrial verticals.
Catering to multiple marquee
customers globally such as ABB,
Honeywell International, Thales Global, Molbio Diagnostics with whom it enjoy
sustained and long-standing relationships as their preferred partner. These
marquee clients together contribute more than 50% of the revenue of the company.
The order book as of end of March
2023 stood strong at Rs 2432.547 crore. The order book, which is industry
leading, is to be executed over the next 24-30 months.
Strong parentage from Cyient,with
over 3 decades of experience in providing engineering and design solutions
globally.
Weaknesses
Delay, shortage, interruption,
reduction in the supply of or volatility in the prices of raw materials
including electronics components such as semi conductors may affect the
operations of the company.
Slowdown and reduced spending in
the industries in which customers of the company operate.
The capacity utilization of the Mysuru
and Hyderabad facility in FY2023 for PCBA was 38.43% and 7.61%, respectively,
which is lower in comparison to other manufacturing companies.
In FY2023 about 90.75% of its
total revenue from operations was contributed by its Mysuru facility.
Do not own the Cyient trademark,
which is registered in favour of its Promoter but has entered a Trade-Name
License Agreement, dated December 13, 2022, with its Promoter.
Some of corporate records,
including those relating to allotments of Equity Shares in the past, are not
traceable.
Change in import and export
regulations of both India and key export and import markets.
Trade receivables as end of
March 31, 2023, stood at Rs 161.78 crore, which is about 19.4% of FY2023
revenue.
Valuation
Consolidated sales for the fiscal
ended March 2023 were higher by 15% to Rs 832.03 crore. With the operating
profit margin contracting by 110 bps 10.6%, the growth at operating profit
moderated to stand at 4% to Rs 87.78 crore. After accounting for lower other
income, higher interest and depreciation as well as taxation, the PAT was down
by 20% to Rs 31.73 crore.
The consolidated EPS (on
expanded post issue equity based on the upper price) for FY2023 is Rs 4 and the PE works out to 66.3 times.
In comparison, the EMS players
of similar size in revenue such as Syrma SGS Technology, Kaynes Technology, DCX
Systems and Avalon Technology are
quoting at a PE of 66.2 times 95.2 times, 34.9 times and 65.9 times of their
consolidated EPS for FY2023. Similarly, larger players such as Dixon
Technologies and Amber Enterprises quotes at PE of 103.64 times and 50.42 times
their consolidated FY2023 EPS.
Cyient DLM: Issue Highlights
|
|
Fresh Issue (in Rs Crore)
|
592
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Price band (Rs.)
|
|
Upper
|
265
|
Lower
|
250
|
Post-issue equity (Rs crore)
|
|
in Upper price band
|
79.28
|
in Lower Price Band
|
80.62
|
Post-issue promoter (including
promoter group) stake (%)
|
66.68
|
Minimum Bid (in nos.)
|
56
|
Issue Open Date
|
27-06-2023
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Issue Close Date
|
30-06-2023
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Listing
|
BSE, NSE
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Rating
|
45/100
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Cyient DLM :
Re-stated Consolidated Financials
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|
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
|
Sales
|
628.03
|
720.53
|
832.03
|
|
OPM (%)
|
7.3
|
11.7
|
10.6
|
|
OP
|
45.94
|
84.04
|
87.78
|
|
Other income
|
8.88
|
7.95
|
6.31
|
|
PBIDT
|
54.83
|
91.99
|
94.09
|
|
Interest
|
20.77
|
21.98
|
31.52
|
|
PBDT
|
34.06
|
70.02
|
62.58
|
|
Depreciation
|
18.46
|
19.29
|
19.42
|
|
PBT
|
15.60
|
50.73
|
43.16
|
|
EO Exp
|
0.00
|
0.00
|
0.00
|
|
PBT after EO
|
15.60
|
50.73
|
43.16
|
|
Tax
|
3.78
|
10.94
|
11.43
|
|
PAT
|
11.81
|
39.80
|
31.73
|
|
EPS (Rs)*
|
1.5
|
5.0
|
4.0
|
|
* on post IPO equity (on upper price band) of
Rs 79.28 crore. Face Value: Rs 10
|
|
EPS is calculated after excluding EO and
relevant tax
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|
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Figures in Rs crore
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Source: Capitaline Corporate database
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