Zensar Technologies Ltd. share price target

Maintain BUY with a TP of Rs 1,050 based on 14x Dec-19 EPS Zensar delivered healthy revenue growth and margin beat in 3QFY18. Revenue stood at USD 122.6mn (+3.4% QoQ, +3.5% CC), higher than our estimate of USD 121.5mn. Growth was led by AMS (83% of rev, +3.1% QoQ) and revival in IMS (+4.6% QoQ). EBITDA margin expansion of 165bps to 13.4% (vs. estimate of 12.3%) in a seasonally weak quarter was a positive surprise. Margin expansion was led by increase in fixed price contracts (+8.0% QoQ).

ZENT's 3.4% QoQ growth was above our estimate of +1.5%. Strong growth despite seasonal weakness was led by 9% QoQ growth in Digital, which now constitutes 39% of total revenue. Gross/EBITDA margin expansion of 130/170bp was mainly driven by higher growth from Digital and efficiencies led by internal deployment of its Return on Digital proposition. PAT of INR574m (-5.7% QoQ) bettered our estimate of INR549m (-9.7% QoQ), led by the overall operational beat. Besides revenue growth,validation of ZENT's reformed offerings comes from its USD100m TCV deal wins, most of which are in Digital. It has also infused these offerings in its top customer, making the otherwise traditional IT support account more balanced. Vinci, its autonomics offering in Infrastructure, is running pilots with multiple customers, which are likely to convert into deals over coming quarters, propelling the services business in IM, which grew 7.5% QoQ in 3Q.

Digital Continues to Grow; Business is Set on the Revival Track: Revenue for Zensar Technologies in Q2FY18 was recorded at Rs. 7,626 Mn, registering a sequential growth of 3.5% and a decline of 1.2% YoY. EBITDA margins saw some revival during the quarter and were recorded at 11.6%, marking an increase of 145bps QoQ.

Maintain a BUY with a TP of Rs 930 based on 13x Sep-19 EPS. Zensar delivered a fine performance in 2Q. Revenue stood at USD 118.6mn (+3.8%, +3.3% CC), in-line with our estimate of USD 118.0mn. Growth was led by AMS (83% of rev, +5.8% QoQ), offset by weakness in IMS (-5.2% QoQ). IMS restructuring is taking longer-than-expected, and will be completed by FY18E. EBITDA margin expansion of 151bps at 11.8% (vs. estimate of 9.9%), despite a wage hike (-150 bps impact) and IMS weakness, was a positive surprise.

from other factors, a decline of 150bp on headcount resulted in a 300bp increase in utilization. PAT at INR608m (13.6% YoY) was better than our estimate of INR543m, led by the overall operational beat. Smaller bits driving growth: 90% of incremental growth in 2QFY18 was driven by geographies other than the US. Performance in the US (72% of revenue) has been weak for more than a year, and the front-end here recently saw a refresh. Although growth in several pockets has been strong enough to offset this weakness this quarter, it would be necessary for the US...

Q1FY18 revenue was largely in line led by Retail and BFSI (up ~9% QoQ, aggregate share at ~47%). Execution was strong with increase in offshore revenue share and utilization rates. However, higher onsite efforts and currency impacted the margin (10% vs. our estimate: 12%). Higher depreciation/amorti..

Soft Performance in Q4FY17; Robust Deal Pipeline to Propel the Future Growth Story: Revenue for Zensar Technologies in FY17 was recorded at Rs. 30,604 Mn registeringa growth of 3.5% YoY. The quarterly performance was dented as a result of slowdown in ramp-up of orders in the US for traditional projects, strong currency fluctuationsleading to appreciation in Rupee and few one-off costs accounted for during the quarter. Revenue for Q4FY17 was recorded at Rs. 7,438 Mn marking a decline of 5.6% QoQ.

Q4FY17 revenue was below our estimates due to delay in traditional projects and conscious decline in non-core areas ofMVS and IM products.

We maintain our positive view due to Zenzars digital/SMAC capabilities (70% of the clients are on the digital platform) and robust digital deal pipeline. We build 6/18% revenue/EPS CAGR over FY17-19E. Maintain a BUY with a TP of Rs 1,023 based on 13x FY19 EPS.

Muted growth in APM coupled with decline in IMS; Downgrade to SELL USD revenue dipped 4.9% QoQ (DCMe: 4%QoQ growth) on back of decline in IMS by 25.6% QoQ. EBIT margin declined 464bps QoQ to 7.7% (DCMe: 12.1%) largely on the back of one-time provision/write offs (~200bps). Organic growth in digital services remains weak as the digital commerce segment reports mere 3% YoY growth. Despite our assumption of a bestcase growth in the app segment (10% YoY including Keystone) for FY18,...