Cyient DLM aerospace ramp-up and record order book support margin-led earnings growth

Investment View and Growth Drivers

Motilal Oswal Financial Services, in its July 21, 2026 1QFY27 results update, views Cyient DLM as entering a multi-year growth phase. The broker believes FY27 could be an inflection year, supported by a 22 per cent year-on-year expansion in the order book to Rs 2,600 crore, the ramp-up of aerospace programmes for Honeywell and Thales, a rising contribution from higher-margin box-build and build-to-specification (B2S) offerings, and operating leverage.

Expansion into AI data-centre infrastructure, robotics and semiconductor capital equipment is expected to create additional growth avenues. Motilal Oswal reiterates its Buy recommendation with a target price of Rs 800, based on 40 times FY28E earnings per share.

Strong 1QFY27 Financial Performance

Cyient DLM reported consolidated 1QFY27 revenue growth of 34 per cent year-on-year to Rs 373.8 crore, ahead of Motilal Oswal's estimate of Rs 350 crore. Aerospace, defence and industrial revenue grew 41 per cent, 34 per cent and 95 per cent year-on-year, respectively. MedTech revenue declined 7 per cent, while auto and other revenue declined 78 per cent year-on-year.

EBITDA margin expansion was attributed to operating leverage. Adjusted profit after tax increased 2.2 times year-on-year to Rs 16.3 crore, in line with the broker's estimate. Gross margin contracted because of product-mix changes.

Record Order Intake and Aerospace Ramp-Up

Order intake was about Rs 552 crore during 1QFY27, compared with an average of Rs 430 crore over the previous eight quarters, resulting in a book-to-bill ratio of 1.5 times. The record order book was broad-based and did not include large one-off orders. About 70 per cent of quarterly intake came from existing customers and 30 per cent came from customers added during the past four quarters.

Aerospace was Cyient DLM's largest segment, accounting for 42 per cent of revenue and delivering 40 per cent year-on-year growth. Management highlighted the company's position with global aerospace original equipment manufacturers and Tier-1 suppliers. High qualification requirements and long approval cycles create entry barriers and support sticky revenue streams.

Honeywell programmes are expected to ramp up over the next 12-18 months, while Thales is expected to contribute meaningfully in FY27. Cyient DLM is also undertaking engineering and design work for SkyDrive's eVTOL platform, with production expected to begin in 18-24 months.

New Growth Opportunities and Capacity Readiness

Management expects initial order wins in AI infrastructure, robotics and semiconductor equipment during FY27, with meaningful revenue contribution over the medium term. Dedicated leadership has been added for these areas, and the company is already seeing customer engagement in semiconductor capital equipment. Stronger revenue traction in this segment is expected in six to 12 months.

Existing manufacturing infrastructure is largely adequate for these opportunities, limiting incremental capital-expenditure needs. Cyient DLM expanded B2S laboratory capacity from 6,000 square feet to 15,000 square feet and completed the NADCAP certification audit for cable-harness assembly at its Mysore facility.

Margin Expansion and Working Capital

Management expects EBITDA margin to improve to 11-13 per cent during FY27-FY29 through operating leverage, cost discipline and a higher mix of AI infrastructure, robotics and semiconductor equipment. Over the longer term, higher B2S and platform-led revenue could lift margins towards 13-18 per cent. B2S alone is expected to add 250-300 basis points to consolidated EBITDA margin over time.

Net working capital stood at 161 days at June 2026, four days better year-on-year, aided by inventory days falling to 162 from 185. Management nevertheless described working capital as elevated because of deliberate inventory stocking and lower customer advances. Free cash flow remained affected by these investments and is expected to normalise as inventory stabilises.

Operational Challenges and Segment Commentary

West Asia-related logistics delays and elevated freight costs remained operational challenges. Management said proactive procurement planning, inventory stocking and alternate sourcing had avoided disruption, and similar mitigation measures were implemented for 2QFY27.

MedTech growth was muted because of seasonality at one customer. Management sees no structural weakness in the segment and cited a healthy opportunity pipeline.

Forecasts and Valuation

Following the strong first-quarter performance, Motilal Oswal raised its FY27E and FY28E estimates as follows:

The broker forecasts FY26-FY28E revenue, EBITDA and adjusted PAT compound annual growth rates of 27 per cent, 40 per cent and 67 per cent, respectively. Motilal Oswal reiterates its Buy recommendation with a Rs 800 target price, based on 40 times FY28E EPS.