Cyient DLM — Q1 FY26 earnings call

Call held 22 Jul 2025

Management summary

Cyient DLM reported a robust Q1 FY26 with strong order intake and improved margins, despite muted revenue growth due to a large customer order ending and Middle East conflict. The company is strategically focusing on high-reliability sectors, leveraging its hybrid India-US model, and expects double-digit EBITDA margins for the year, with a long-term target of 12-13%.

Highlights

  • Revenue grew 8% YoY to INR 2,784 million in Q1 FY26.

  • EBITDA increased 25.3% YoY to INR 251 million, with margin expanding 125 bps to 9%.

  • Net Profit stood at INR 75 million, with a margin of 2.7%.

  • Order intake was INR 515 crores, the highest in 10 quarters.

  • Order backlog reached INR 2,138 million, growing INR 225.7 crores QoQ.

  • Book-to-bill ratio was close to 2 in Q1, with confidence to maintain above 1 for FY26.

  • Generated INR 80 crores in free cash flow during the quarter.

  • Capacity utilization is low (55-60%), offering significant headroom for growth without major capex.

Concerns

  • Middle East conflict impacting supply chain

Key financials

  1. Revenue 2,784 Mn +8%YoY
  2. EBITDA 251 Mn +25.3%YoY
  3. EBITDA Margin 9%
  4. PAT 75 Mn
  5. PAT Margin 2.7%
  6. Free Cash Flow ₹80 Cr

What they filed

Q1 FY27: revenue up 34.5%, net profit up 128.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue389 444 428 278 311 −20%303 −32%369 −14%374 +35%
EBITDA32 28 57 25 31 −3%28 +0%43 −25%39 +56%
Net profit15 11 31 7 32 +113%11 +0%22 −29%16 +129%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

₹2,138 Mn

as of 2025-06-30 quantified

11.8% QoQ

Inflow this quarter

₹515 Cr

Execution

executable over next 18-24 months depending on the order

Composition

Mix 3 segments
  • Aerospace & Defense 49%
  • Industrial 25.5%
  • Medical 25.5%

Share of order book by segment

Cancellations & deferrals

  • deferred: Delay in securing repeat order from a major customer
  • deferred: Q1 deliveries impacted due to Middle East conflict
The order book shows strong momentum with higher-margin orders, and the company is confident in sustaining a book-to-bill ratio significantly above 1.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹40 Cr from IPO proceeds
    • General CAPEX from IPO proceeds ₹40 Cr
    We have about another INR 100 crores left to be used for the rest of the year, out of which INR 60 crores is towards working capital and about INR 40 crores towards CAPEX.
  • M&A Inorganic expansion targets Acquisition · Pending regulatory

    Focus on technology, geographic footprint, customer proximity, regional capability

    We are in early-stage conversation with a few companies, and at an advanced stage at this point in time. As and when, we make progress we will let you know but for now, I think it's more of
  • Liquidity Liquidity disclosed Used INR 60 crores of IPO proceeds for working capital in Q1. INR 100 crores left from IPO proceeds for rest of FY26 (INR 60 crores for WC, INR 40 crores for CAPEX). No pressure to raise funds due to 'heady cash position'.
    Lastly, on the IPO proceeds, we have used up about INR 60 crores towards working capital in the current quarter. We have about another INR 100 crores left to be used for the rest of the year, out of which INR 60 crores is towards working capital and about INR 40 crores towards CAPEX. So, in terms of the IPO proceeds usage, as I mentioned, I think we have been completely compliant in terms of the issue proceeds as stated in the RHP. And we will continue to show this through as we continue to use the rest of the funds. Now there is no pressure to sort of raise funds because they are in a heady cash position as of this quarter, right?

Guidance & targets

Revenue

  • Long-term Revenue Growth Revenue · next 5 years · High confidence 30% CAGR
    I think what we have said that in the past is over a long-term period of 5 years, I think we can confidently say that we will grow at 30% CAGR, right?

    — Rajendra Velagapudi

  • B2S Revenue Contribution Revenue · FY26 · Medium confidence 5%
    On the B2S, as I said, in the FY '26 immediately, we won't be seeing much revenue coming over on this one, so it will be probably 5% of the revenue in FY '26.

    — Rajendra Velagapudi

  • B2S Long-term Revenue Revenue · over the years · Low confidence 100+ million
    So, it will be probably 5% of the revenue in FY '26. Otherwise, we will be seeing as I said, some of the things which are right now in the pipeline, where we will be working on this, so probably both things will be having maybe 100-plus million of revenue which we will be seeing over the years.

    — Rajendra Velagapudi

Margin

  • Sustainable EBITDA Margin Margin · 3-4 years out · Medium confidence 12-13%
    Again, this is not a guidance, but we definitely will see a line of sight to a 12%, 13% sustainable margin.

    — Rajendra Velagapudi

Order Book

  • Book-to-Bill Ratio Order Book · FY26 · High confidence more than 1
    I think as said earlier, we are very confident that the book-to-bill ratio will be more than 1, okay. So, we will be beyond that 1, probably we will be working. Otherwise, by end of the year, definitely the book-to-bill ratio will be more than 1.

    — Rajendra Velagapudi

Market context

  • EBITDA Margin Margin · current year · High confidence double-digit
    we will see significant leverage flowing into the P&L, and we are extremely confident of our double-digit EBITDA at this point in time.

    — Shrinivas Kulkarni

What to watch in Q2 FY26

Book-to-Bill Ratio

Next quarter / FY26
Current Close to 2 (Q1 FY26)
Target More than 1

Why it matters

Indicates the company's ability to secure new orders and sustain future revenue growth.

With momentum building, we are confident and suggest in sustaining this trajectory and achieving and continuing to achieve a book-to-bill ratio significantly above 1 going forward.

Risks & concerns

  • Middle East conflict impacting supply chain

    high

    Q1 deliveries were impacted due to the conflict, causing supply chain disruptions, rerouting, increased flight times, and higher costs.

    Management acknowledged

  • Delay in securing repeat order from a major customer

    medium

    A delay in securing a repeat order from a major customer temporarily affected growth in Q1 FY26.

    Management acknowledged

  • Amortization of intangibles impacting PAT margin

    low

    Non-cash amortization charges from purchase price allocation are impacting PAT margin.

    Management acknowledged

  • Lower other income impacting PAT

    low

    Reduced other income, due to lower unutilized IPO funds compared to last year, contributed to lower PAT.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
B2S revenue contribution and profitability Direct
On the B2S, as I said, in the FY '26 immediately, we won't be seeing much revenue coming over on this one, so it will be probably 5% of the revenue in FY '26. Otherwise, we will be seeing as I said, some of the things which are right now in the pipeline, where we will be working on this, so probably both things will be having maybe 100-plus million of revenue which we will be seeing over the years.

Provides specific revenue guidance for the new B2S segment in the short and long term, indicating its potential impact.

Asked by Balasubramanian A

US operations margin profile vs India and balancing production Direct
Yes. So, I think as I said earlier, so we are all working out right now with our customers and also the new prospects where we will be bringing a value in terms of working at a low cost at offshore and probably doing the final assemblies at the customer, at our U.S. operations. So, that way we can bring in value to our customers in reducing the final product price. So, those are the things which right now lot of our customers are in discussion, some RFQs we are working out with them. So, we will be seeing those traction.

Explains the strategy for integrating US operations (Altek) and leveraging a hybrid model for cost efficiency and customer value, addressing tariff uncertainties.

Asked by Balasubramanian A

Defense segment rebound and mitigation Direct
No, I think the Defense sector will keep focusing, as you have seen this quarter the revenues for Defense, but otherwise, for the last year, there is mainly because of one customer, where we said. I think there is probably a cyclic nature of the business. So, we will be working out with the customer for the other opportunities and some of the repeat business there. And at the same time, we are also working with the other Defense prospects at this point of time, both for U.S. and also there is a lot of focus on the India Defense.

Clarifies that the Defense segment remains a focus despite past degrowth, attributing it to cyclicality and outlining efforts for new opportunities.

Asked by Balasubramanian A

Inorganic expansion focus and IPO funds utilization Direct
Yes. So, in terms of IPO funds, I think whatever was earmarked towards M&A have already been used. So, if we do a new M&A, we would M&A we have to do fund raise. In terms of the targets, I think we have identified the areas, right? Like Rajendra explained, I think there are customer proximity, the regional capability and technology focus are the areas.

Provides clarity on the use of IPO funds for M&A and the strategic areas for future acquisitions, implying future M&A would require new funding.

Asked by Balasubramanian A

Revenue growth outlook for FY26 and FY27 Partial
Madhav, we are refraining from giving a full-year guidance. I think what we have said that in the past is over a long-term period of 5 years, I think we can confidently say that we will grow at 30% CAGR, right? But there will be odd years where it will be down, another year where revenue will be higher than that.

Management reiterates long-term CAGR but avoids specific short-term guidance, highlighting business dynamism and the impact of large orders.

Asked by Madhav Marda

EBITDA margin potential and sustainability Direct
Yes. I mean clearly, there is a line of sight to get to teens at least, early teens, if not low teens. But it all depends on the mix of business that we grow. For now, for the current year, we will definitely be a double-digit margin company... we definitely will see a line of sight to a 12%, 13% sustainable margin.

Provides a clear long-term margin target (12-13% sustainable) and explains the drivers, such as operating leverage and business mix.

Asked by Madhav Marda

Capacity utilization and operating leverage Direct
Certainly. I think our current capacity utilization is quite low. On a full-year basis, we will be close to 55%, 60% of capacity utilization. And this is running at 2 shifts, right? So, if we actually run 3 shifts, we can potentially double the current revenue without having to add any new factory or new SMT line, right? So, we have a huge runway in terms of growth without having to spend any further significant CAPEX.

Highlights significant headroom for growth without major capex, indicating strong operating leverage potential and future margin expansion.

Asked by Madhav Marda

Update on BEL repeat order Evasive
So, we don't have any clear indication of the repeat order, when it is going to happen. So, basically BEL has to get it from their end customer, basically from the Indian Defense side, Navy. So, we still don't have that visibility, so we are working out.

Indicates continued uncertainty regarding a significant repeat order, which was a factor in Q1's muted growth.

Asked by Deepak Lalwani

2 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

Cyient DLM reported Q1 FY26 revenue of INR 2,784 million, marking an 8% year-on-year growth. EBITDA increased by 25.3% year-on-year to INR 251 million, with the EBITDA margin improving by 125 basis points to 9%. Net profit stood at INR 75 million, representing a 2.7% margin, which was impacted by amortization of intangibles and lower other income.

Strong Order Intake and Backlog

The company achieved its highest quarterly order intake in 10 quarters, totaling INR 515 crores. This contributed to a robust order backlog of INR 2,138 million, showing a quarter-on-quarter growth of INR 225.7 crores. The book-to-bill ratio for Q1 was close to 2, and management is confident it will remain above 1 for the full year, with approximately 50% of the new orders executable within the current fiscal year.

Strategic Focus and Market Opportunities

Cyient DLM is accelerating its growth trajectory by strengthening global partnerships and deepening its presence in high-reliability sectors such as Aerospace, Defense, Medical, and Industrial. The company is observing a shift towards regional manufacturing, with the China Plus One strategy benefiting its hybrid India and US model. Opportunities are also emerging in renewable energy, EV adoption, robotics, and automation, supported by PLI schemes in India.

Leadership Transition and B2S Segment Growth

Mr. Rajendra Velagapudi has been appointed CEO, in addition to his role as Managing Director, to oversee overall operations. The company added one new global logo, Deutsche Aircraft, in Q1 for BTS projects and is finalizing two major B2S orders. The B2S segment is expected to contribute approximately 5% of FY26 revenue, with a long-term potential of over INR 100 million.

Margin Expansion and Operating Leverage

The company's EBITDA margin improved to 9% in Q1, driven by a better revenue mix with higher-margin orders. Management anticipates achieving double-digit EBITDA margins for the current year and a sustainable 12-13% margin in the early teens over the next 3-4 years. Current capacity utilization is low (55-60% on a full-year basis with 2 shifts), indicating significant headroom to double revenue without substantial new CAPEX, leveraging indirect costs.

Supply Chain Disruptions and Mitigation

Q1 deliveries were impacted by the Middle East conflict, leading to supply chain disruptions, rerouting, increased flight times, and higher costs. This contributed to muted revenue growth for the quarter. However, management noted that the situation seems to be under control and expects these pushouts to correct within a quarter, with growth anticipated in other areas of the group.

Capital Allocation and Liquidity

The company generated INR 80 crores in free cash flow during Q1. From IPO proceeds, INR 60 crores were utilized for working capital in Q1, with INR 100 crores remaining for the rest of the year (INR 60 crores for working capital and INR 40 crores for CAPEX). IPO funds earmarked for M&A have been fully utilized, and any future M&A would require new fundraising. The company maintains a 'heady cash position' with no immediate pressure to raise funds.

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