Cyient DLM

Cyient DLM reported a Q3 FY26 revenue of INR 3,033 million, a significant 31.7% year-on-year decline. This softness was attributed to customer-specific issues, the year-end holiday period, and tariff-related uncertainties. However, management clarified that these push-outs are expected to ship in Q4, with no prolonged impact. Despite the revenue decline, normalized EBITDA margin improved by 207 basis points YoY to 10.2%, reaching INR 309 million, while normalized PAT margin increased by 73 basis points YoY to 4.6% (INR 138 million).

The company's order book remained strong, closing Q3 at INR 23.5 billion, marking a quarter-on-quarter increase of INR 583 million. New order intake for the quarter was INR 387 crores, resulting in a healthy book-to-bill ratio of 1.3 for Q3 and 1.56 year-to-date. This sustained order momentum is driven by new customer acquisitions and strengthening existing portfolios, primarily from the India market, with major contributions from the aerospace, industrial, and medical sectors.

Cyient DLM achieved double-digit EBITDA margins, with normalized EBITDA at 10.2% and reported at 9.1%. This margin improvement is attributed to a healthier revenue mix, strong operational efficiencies, and the higher margin profile of new orders. The company is actively diversifying its industry mix, with increasing contributions from automotive, industrial, and medical segments. The build-to-spec (B2S) mix, currently 6-7% in FY26, is expected to grow to double-digits in FY27, further enhancing margins.

The company is strengthening its sales engine in India and international markets, adding key strategic sales resources to pursue larger opportunities and deepen customer engagement. Investments in advanced manufacturing technologies, automation, and digitization are enhancing operational excellence. Cyient DLM is also expanding its presence in Europe, exploring inorganic growth opportunities, and doubling down on global defense opportunities by investing in necessary certifications and capabilities.

Cyient DLM is net cash positive and holds dry powder of INR 350-400 crores for potential capital expansions or acquisitions. Capex utilization from IPO proceeds stands at 15.4%, with regular capex expected to be 1-2% of revenues. A one-off^📎 expense of $17.75 million was incurred for an abandoned international M&A deal. Net working capital was temporarily elevated in Q3 due to inventory buildup from shipment delays but is expected to normalize by Q4 end, with full-year free cash flow projected to be positive.

Management expressed strong confidence in a robust Q4 FY26, expecting positive year-on-year revenue growth. For FY27, the company anticipates substantial positive growth, with an analyst's projection of 20-25% growth confirmed by management. Margins are expected to sustain in the double-digit range, potentially increasing further in Q4 and FY27, driven by operating leverage and a favorable product mix, particularly the growing build-to-spec segment.