Zensar Technologies Ltd. share price target

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,...

company has domain expertise in Application Management Services (76.2%), Infrastructure Management Services 23.8%).The Company's business is primarily classified into Manufacturing (51.8%), Retail & Consumer services (25.2%), BFSI (19.4%), and Emerging (3.6%). The company's business is spread across USA (74.4%), Europe (12%) and Row (13.6%). It receives 67% of revenues from onsite and 33% of revenues from offshore. Fixed price contracts revenue share is...

Zensar delivered decent 3Q led by digital, however ongoing business restructuring (tail pruning) and increased investment (front-end) is weighing on growth (ex-digital) and margins respectively. Digital (30.0% of revenue) grew 9.3% QoQ led by Foolproof acquisition (organic 1.9% QoQ). We believe (1) Strong relationship with Oracle, (2) Investments in building digital capabilities, and (3) Robust deal wins (US$ 170mn vs US$ 130mn in 2Q) will drive next phase of growth.

Background: Zensar Technologies is an RPG Group company, with end-to-end services from IT development to business process outsourcing. In 2QFY17: company has domain expertise in Application Management Services (76.7%), Infrastructure Management Services 23.3%).The Company's business is primarily classified into Manufacturing (51.8%), Retail & Consumer services (25.7%), BFSI (18.1%), and Emerging (4.5%). The company's business is spread across USA (75.1%), Europe (9.9%), Africa (8.6%), and Row (6.4%). It receives 66.2% of revenues from onsite and 33.8% of revenues from offshore. Fixed price contracts...

ZENT has been taking several transformation measures post the recent investor and leadership change. The key ingredients of its strategy are: [1] Focus on Digital, [2] Attention towards 65 key accounts, and [3] Rejigging presence in Infrastructure Management (IM) towards Services and Cloud. While the first two are revenue drivers, the third leg of its strategy is a driver of margins. Progress in these areas has been substantial, but simultaneous pruning of low-yield accounts and trimming of the Product business is likely to limit revenue growth at 5% in FY17. The churn in the portfolio lays a better foundation for growth beyond FY17, driving our estimate of 12% revenue growth in FY18. This should be seconded by margin expansion from scaling up of newer areas and reconstitution of IM portfolio.They see potential for growth acceleration and stock re-rating. Maintain Buy, with a price target of INR1,300, which discounts forward earnings by 13x.