Cyient DLM Q2 FY27: consolidated PAT +6% YoY, but one-off gain masks a margin miss

Cyient DLM's consolidated revenue grew 26.5% YoY to ₹393.1 Cr (+5.2% QoQ) in Q2 FY27, decelerating from Q1's 34.3% YoY pace but landing inline with our pre-result preview's ₹380–400 Cr expectation band. Reported consolidated PAT was ₹34.0 Cr, up 5.8% YoY and 108.9% QoQ — but that headline overstates the quarter. ₹18.2 Cr of the ₹22.6 Cr in Other Income (and so of the ₹39.3 Cr PBT) is a one-off, non-cash fair-value gain on an earnout liability linked to the US subsidiary, a line that was zero in Q1 FY27 and the year-ago quarter. Strip it out and adjusted PAT is roughly ₹15.8 Cr — down about 50.8% YoY and 2.9% QoQ, a materially weaker underlying print than the headline number suggests.

The real story is margin compression. Consolidated operating margin fell to about 8.7% from 10.5% in Q1 and 10.0% a year ago, while net margin (PAT/total income) was 8.2% against 4.4% in Q1 and 9.6% a year ago — the Q1/year-ago figures both undistorted by one-offs. Employee benefit expense more than doubled YoY to ₹67.9 Cr from ₹32.9 Cr, rising to 17.3% of revenue from 10.6% a year ago, consistent with management's flagged ramp-up hiring for AI Data Center, Robotics and semicon-equipment verticals under its 'Expand phase' strategy; material costs net of inventory movement also outran revenue. This directly missed the preview's flagged EBITDA-margin watch band of 10.5–11% and sits below management's own 11–13% Expand-phase (FY27-29) EBITDA margin target set out on the Q1 call.

The stock went into the print at ₹1,030.1, up 16.7% over the past month of trading.

For context: this is the highest quarterly PAT in the last 6 quarters on our records; revenue is at a 6-quarter high.

EPS: consolidated ₹4.28, standalone ₹2.44 for the quarter, both on an unaudited, limited-review basis.

Notably, standalone (India EMS core) results show no such distortion and are genuinely strong — standalone PAT rose about 43% YoY to ₹19.4 Cr on 25.1% revenue growth to ₹294.8 Cr — suggesting both the consolidated drag and the earnout fair-value gain trace back to the US subsidiary, whose underperformance against earnout targets would explain a reduction in the liability value (and the resulting P&L gain). Against the Street, our pre-result read noted a 10-analyst consensus average target of ₹590.5 against a pre-result price of ₹981.3; no fresh, Q2-specific consensus revenue/PAT estimate could be independently confirmed via web search at filing time, so this margin miss is judged against our own preview's watch band rather than a verified external number. Management gave no quantitative FY27 guidance on the Q1 call beyond 'similar momentum' and a 1.5x book-to-bill target; book-to-bill/order-book figures were not disclosed in this filing, leaving that checkpoint unverified this quarter. Beyond the board-outcome letter, no separate management press release accompanied this result; the same board meeting approved Sandip Mishra as Senior VP & CHRO and routine RSU/ESOP grants to associates, items unrelated to the quarter's numbers.