Orderbook Will Reverse Its Downward Trajectory From Q2FY26: Cyient DLM | CNBC TV18

Summary

Scend's CEO, Anthony, discusses the company's strong financial performance with a focus on margins and growth outlook. He highlights a one-off boost to margins but expects consistent margins of 10-12% going forward. While the company is not giving exact topline growth guidance, they are optimistic about diversifying their order book, with new deals in the pipeline. The company is shifting its sector mix, reducing its reliance on defense and aerospace while increasing focus on industrials and medical sectors. The CEO also mentions the growing interest in U.S. and India operations due to the 'China Plus One' strategy amid global geopolitical shifts.

Takeaways

• 😀 Strong margin performance in the last quarter, boosted by a one-off event, but expected to stabilize at 10-12% moving forward.
• 😀 The company anticipates continued growth despite a slight decline in order book over the past seven quarters.
• 😀 The order book is being impacted by a significant long-term contract, but new deals and diversified portfolios are expected to drive future growth.
• 😀 There is optimism in the market with the company pursuing high-value deals with multinational companies and new logos.
• 😀 The company is transitioning from a heavy reliance on aerospace and defense (A&D) towards a more balanced mix, increasing industrial and medical sectors.
• 😀 A&D will still be a major part of the business but expected to drop by 5% in overall portfolio share as industrials and medical grow.
• 😀 US operations are becoming a key focus with increased demand due to the global shift from China-based manufacturing.
• 😀 Clients are in a 'wait-and-see' mode regarding sourcing decisions, with some delaying order closures but showing significant interest in alternative solutions.
• 😀 The company is confident in its India operations, especially in light of the China-plus-one strategy benefiting India’s tariff environment.
• 😀 The CEO is optimistic about growth prospects in both the US and India, with a significant pipeline of deals poised to close in the coming quarters.

Q & A

What was the key factor contributing to the increase in Scend's margins during the last quarter?

The increase in margins was largely due to a one-off event that provided a 200-250 basis point boost. This event involved recognizing claims from past client relationships where Scend had been conservative in claiming revenue.

What is Scend's expected margin range moving forward?

Scend expects to maintain margins in the range of 10-12% going forward, driven by improvements in product mix and operational efficiencies, as well as the completion of a margin-dilutive program.

How does Scend plan to address its order book situation, which has seen a decline for several quarters?

While Scend has experienced order book degrowth for seven consecutive quarters, they are optimistic about future growth due to a pipeline of significant deals, including new industry-leading multinational clients. They expect the order book to turn positive as these deals mature and close.

What is the expected performance of Scend's revenue growth, and why is it difficult to provide exact guidance?

Scend is optimistic about its topline growth but has refrained from providing exact guidance due to the unpredictability of its business, which has been influenced by large contracts and the timing of new deals.

How does Scend's sector focus mix change in terms of industry and geographical areas?

Scend is shifting its focus from being heavily dependent on defense and aerospace (A&D) to incorporating more industrial and medical sectors into its portfolio. Geographically, their US operations will grow, especially in the medical and industrial sectors, as part of a strategy to diversify their client base.

What is Scend's target for the defense and aerospace sector's share in its overall business mix?

Scend expects the defense and aerospace sector's share to decrease by about 5-10%, with industrial and medical sectors contributing more significantly to their business.

How does Scend view the impact of the US-China trade tensions on their business?

Scend has seen increased interest in their US operations, as well as in their Indian operations, due to the ongoing US-China trade tensions. The company expects the 'China plus one' strategy to benefit them, particularly in terms of attracting multinational clients seeking alternatives to China.

What is the company's outlook on the medical and industrial sectors in the future?

Scend anticipates that the medical and industrial sectors will play an increasingly important role in their portfolio. The company is focused on diversifying its revenue streams, with medical and industrial sectors expected to contribute more in the coming years.

How does Scend plan to manage the uncertainty around its order book in the short term?

In the short term, Scend expects a soft first quarter, but they are confident that deals in their pipeline, including those with new multinational clients, will begin to materialize and positively impact the order book from the second quarter onward.

What is Scend's strategy for dealing with long supply chains and lead times in the defense and aerospace sector?

Scend aims to balance the long supply chains and lead times associated with defense and aerospace with more nimble operations in the industrial and medical sectors. This diversification will allow the company to better handle fluctuating demand and lead times.