Morgan Stanley has projected an optimistic forecast for the IT midcap stock, Cyient, upgrading it to 'Overweight'. This upgrade is based on a number of factors, including new clientele and steady expenditure in the engineering sector. Prominent sectors contributing to this growth include aerospace and the bottoming rail vertical.
Cyient's stock has seen a significant rise, up 100% annually. Despite surpassing its historical average, the stock is anticipated to climb even further. This is largely due to the portfolio vertical that continues to generate faster-than-company-average growth.
Morgan Stanley has set a base target of Rs 2,000 and a bullish scenario of Rs 2,700 for Cyient. These projections take into account Cyient's FY23 bottomed-out EBIT margin. Furthermore, the financial services firm predicts a 16.4% services revenue Compound Annual Growth Rate (CAGR) and a 31.2% EBIT CAGR over F23-25. This expected growth is attributed to large deal wins and is calculated applying a 20% holdco discount to Cyient DLM's market cap.
The projections also factor in an assumed cost of equity of 10.5% and a 4% terminal growth rate. The cost of equity is particularly noteworthy as it reflects the return required by investors to hold the stock. A higher cost of equity can indicate higher perceived risk or expected growth.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.