Cyient DLM: Navigating Growth with Strategic Resilience in Q2 FY26

Cyient DLM Limited, a prominent player in the electronics manufacturing services sector, recently announced its financial results for the second quarter of fiscal year 2026 (Q2 FY26). The company reported a consolidated revenue of ₹310.6 crore, marking a 20.2% year-over-year (YoY) decline. Despite this top-line contraction, primarily attributed to the completion of a large order, Cyient DLM demonstrated remarkable operational resilience, with its EBITDA remaining nearly flat at ₹31.2 crore, a marginal 1.4% YoY decrease. The company's reported Profit After Tax (PAT) saw a significant surge of 108.0% YoY, reaching ₹32.1 crore, though this included a one-off earnout reversal. Excluding this extraordinary gain, the normalized PAT stood at ₹12.6 crore, reflecting a 18.7% YoY decline.

The revenue decline was largely concentrated in the Defence segment, which experienced a 90% YoY degrowth due to the completion of a major order. However, the Aerospace segment showed strong growth at 47% YoY. The company's focused efforts to strengthen its Industrial and Med-Tech segments yielded impressive YoY growth rates of 256% and 114%, respectively. This strategic diversification is evident in the product category mix, where PCBA contributed 51% of revenue, Box Build 25%, Cables 22%, and Mech & Others 2%. The Box Build segment, known for its stickiness and slightly higher margins, recorded a 34% YoY growth, while Mech & Others saw an exceptional 764% YoY increase.

Strategic Shifts and Market Traction

Cyient DLM's strategic narrative revolves around 'Strengthen, Expand, and Transform.' The company is actively strengthening its current business by focusing on account mining and building strategic client relationships. A significant emphasis is placed on the domestic Indian market, which is expected to contribute a higher mix going forward. The company's Build-to-Specification (B2S) offerings are gaining strong momentum, securing prestigious awards from global OEMs and engaging clients in early-stage product development. These design-led engagements are crucial as they are expected to ramp up to mass production in the coming years, reinforcing long-term growth and customer partnerships.

In terms of expansion, Cyient DLM is aggressively targeting non-Aerospace & Defence sectors, particularly medical, industrial, and the burgeoning electric vehicle (EV) infrastructure. The company successfully added two global new logos in Q2 FY26: a Japanese EVOTL (Electric Vertical Take-Off and Landing) company focused on future mobility and an EV Charging company specializing in EV solutions. These wins underscore the company's progress in emerging industry segments, especially automotive. The company is also exploring inorganic growth opportunities through acquisitions in North America (NAM) and Europe (EMEA) to expand its global presence and capabilities.

Operational Efficiency and Future Outlook

Despite the revenue headwinds, Cyient DLM's operational efficiency improved, reflected in a healthier material cost ratio due to a better mix and enhanced supply chain efforts. The company's order backlog expanded significantly to ₹2,291 crore, driven by a robust order intake of approximately ₹498 crore in Q2 FY26, resulting in a strong book-to-bill ratio of 1.6. This consistent order intake, coupled with a healthy pipeline, provides strong visibility for future growth.

Management indicated that the Q1 FY26 order intake would be executed over Q2, Q3, and Q4 FY26, with about one-fourth of the Q2 order intake also contributing to H2 revenues. The company expects the book-to-bill ratio to be between 1.4 to 1.5 for the full year. Geopolitical developments, particularly in Israel, have posed some challenges, but the company is actively managing these to minimize impact. The inclusion of US operations, through the Altek acquisition, has led to an increase in employee and other expenses, but it also provides strategic advantages in client proximity and delivery continuity.

Cyient DLM's Q2 FY26 results highlight a period of strategic recalibration and operational resilience. Despite a temporary revenue setback, the company's focus on high-margin segments, diversification into new industries, and a robust order book position it for a strong recovery and sustained growth in the coming quarters. The management is confident about maintaining double-digit EBITDA margins and expects year-over-year growth to revive starting from Q4 FY26, driven by a favorable mix and scale.