Why is Cyient DLM Ltd falling/rising?

Recent Price Movement and Market Performance

On 07 January, Cyient DLM Ltd closed at ₹407.85, down by ₹3.50 or 0.85% from the previous session. This decline is part of a broader trend, with the stock having fallen by 2.03% over the past week, significantly underperforming the Sensex benchmark, which declined by only 0.30% in the same period. The stock has also lost 4.53% over the last month, compared to the Sensex’s 0.88% drop, and is down 2.03% year-to-date against the benchmark’s modest 0.30% fall.

More strikingly, over the last year, Cyient DLM’s shares have plummeted by 36.57%, while the Sensex has gained 8.65%. This stark contrast highlights the stock’s persistent underperformance relative to the broader market. The absence of three- and five-year return data for the stock further emphasises its limited long-term appeal, especially when benchmark indices have delivered robust gains of 41.84% and 76.66% respectively over those periods.

Technical Indicators and Trading Activity

The stock’s technical position remains weak, trading below all key moving averages including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This technical weakness has coincided with a three-day consecutive decline, during which the stock lost 1.86%. Despite this, investor participation has shown some signs of life, with delivery volumes on 06 January rising by 6.29% to 43,590 shares compared to the five-day average. Liquidity remains adequate, supporting trading activity with a typical trade size of around ₹0.06 crore.

Fundamental Strengths Amidst Weak Price Action

Despite the share price weakness, Cyient DLM exhibits several positive fundamental attributes. The company maintains a low average debt-to-equity ratio of zero, indicating a clean balance sheet with minimal leverage. Its latest quarterly profit after tax (PAT) reached a record ₹32.15 crore, accompanied by the highest quarterly earnings per share (EPS) of ₹4.05. Return on equity (ROE) stands at a reasonable 8.3%, suggesting fair profitability relative to shareholder equity.

Valuation metrics also offer some comfort. The stock trades at a price-to-book value of 3.3, which is considered fair and notably at a discount compared to its peers’ historical averages. Furthermore, the company’s profits have grown by 11.7% over the past year, even as the stock price declined sharply. The price/earnings to growth (PEG) ratio of 3.4, however, indicates that the stock may be somewhat expensive relative to its earnings growth rate.

Institutional investors hold a significant 30.92% stake in Cyient DLM, reflecting confidence from entities with greater analytical resources and a longer-term investment horizon. This institutional backing could provide some stability amid the recent price volatility.

Challenges Weighing on the Stock

Nevertheless, the stock’s poor long-term growth prospects remain a key concern. Net sales have expanded at a modest compound annual growth rate of 6.71% over the past five years, which is relatively tepid for an industrial manufacturing company. This slow growth trajectory has contributed to the stock’s underperformance not only in the last year but also over the preceding three years and three months, where it has lagged behind the BSE500 index.

The combination of subdued sales growth, disappointing returns, and technical weakness has led to the stock underperforming its sector and broader market indices. This has resulted in a negative sentiment among investors, reflected in the recent price declines and the stock trading below all major moving averages.

Conclusion: Why Cyient DLM Ltd Is Falling

In summary, Cyient DLM Ltd’s share price decline as of 07 January is primarily driven by its sustained underperformance relative to market benchmarks and peers. Despite some encouraging profit growth and a strong balance sheet, the stock’s lacklustre sales growth and poor returns over the past year and beyond have weighed heavily on investor confidence. The technical weakness, reflected in trading below all key moving averages and consecutive daily losses, further compounds the negative outlook.

While institutional investors maintain a sizeable stake, the broader market sentiment remains cautious, likely due to the company’s inability to deliver robust long-term growth and consistent shareholder returns. Investors seeking exposure to industrial manufacturing may therefore consider evaluating alternative opportunities with stronger momentum and fundamentals.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →