Detailed Narrative
Q2 FY26 Financial Performance Overview
Cyient DLM reported a revenue of ₹310.6 crores for Q2 FY26, marking a 20% year-on-year degrowth. Despite this, EBITDA remained almost flat at ₹31.2 crores, driven by significant margin expansion of 192 basis points year-on-year, reaching double-digit figures of 10.05%. The reported PAT grew by 108% year-on-year to ₹32.1 crores, though this included an extraordinary gain from the reversal of an earnout related to an acquisition, with the normalized PAT margin standing at 4%.
Robust Order Book and Book-to-Bill Ratio
The company achieved a strong order intake of nearly ₹500 crores in Q2 FY26, resulting in a robust book-to-bill ratio of 1.6 for the quarter. This contributed to a cumulative H1 order intake exceeding ₹1,000 crores, representing a 130% year-on-year growth. The total order book now stands at ₹2,291 crores, with management expecting the full-year book-to-bill ratio to be between 1.4 and 1.5, indicating strong future revenue visibility.
Strategic Focus on Built-to-Spec (BTS) and Diversification
Cyient DLM is actively strengthening its build-to-spec (BTS) portfolio, which currently accounts for over 10% of its order book. These design-led engagements, such as a new order from a Japanese eVTOL urban air mobility company, are in development and expected to ramp up to mass production in coming years, with bulk manufacturing orders anticipated from FY28. The company is also diversifying its industry mix, with a strategic win in EV charging solutions and a focus on non-Aerospace & Defence sectors like industrial and automotive, aiming for less dependence on traditional segments.
Working Capital Management and Cash Flow
The company demonstrated improved working capital management, with net working capital days reducing from 165 to 139 days. This improvement, along with better DSO and customer advances, contributed to the fourth consecutive quarter of positive free cash flow, with operational FCF reported at ₹46 crores. The reported FCF was ₹27 crores, impacted by a land acquisition for a new factory in Mysore.
Geopolitical Impact and US Operations
Management acknowledged that geopolitical developments, particularly in Israel (a key market), have impacted revenue predictability and slowed decision-making. For its US operations, which contribute approximately 40% of the business, the company is actively working with customers to mitigate the impact of tariffs, exploring solutions like changing ship-to locations or routing products differently, as low margins prevent the company from absorbing these costs directly.
Outlook and Growth Trajectory
Cyient DLM anticipates continued positive momentum, with a promising H2 outlook. Management expects to return to year-on-year revenue growth by Q4 FY26, driven by strong pipeline in India and B2B segments, and continued margin improvement due to a favorable mix and scale. The company is also focusing on expanding its customer base and reducing dependency on top clients, with new customer wins and Indian-based opportunities expected to materialize in Q3-Q4 FY26.