Zensar Technologies Ltd. share price target

Background: Zensar is a leading digital solutions and technology services company that specialises in partnering with global organisations across industries on their Digital Transformation journey. A technology partner of choice, backed by strong track-record of innovation; credible investment in Digital solutions; assertion of commitment to client's success, Zensar's comprehensive range of digital and technology services and solutions enable its customers to achieve new thresholds of business performance. Zensar, with its experience in delivering excellence and superior client satisfaction through myriad technology solutions, is uniquely positioned to help them surpass challenges around running their existing business most efficiently, helping in their legacy transformation, and planning for business expansion...

Zensar reported better than expected results in Q1 FY21. Revenue for the period of Q1 FY21 stood at Rs. 991 cr decline by 2.6% QoQ and 4.8%QoQ in CC terms. Operating margin reported a growth of 11bps and stood at 9.9% aided mainly by INR depreciation, lower utilization.

Commentary around defending margins, healthy deal wins (USD150m), and a robust We upgrade our EPS estimate for FY21/FY22E by 5%/0% as we adjust our revenue growth assumptions and margin trajectory post the beat during the In 1QFY21, revenue (USD) / EBIT (INR) / PAT decreased by 15%/13%/7% YoY v/s our estimate of 17%/32%/30% YoY. The USD1.5b deal pipeline (v/s USD1b in 4QFY20) remains healthy, with robust demand in Cloud and Infrastructure Services and Digital Application Across verticals, Retail is expected to stabilize by 2QFY21 and grow in 2HFY21. We value the stock at ~10x FY22E 1Q revenue was impacted as clients ramped-down some projects as part of their immediate cost-control initiatives in response to COVID-19. Decline was The USD1.5b deal pipeline (v/s USD1b in 4QFY20) remains healthy, with robust demand in Cloud and Infrastructure Services and Digital Application Services. In 1QFY21, revenue (USD) / EBIT (INR) / PAT decreased by 15%/13%/7% YoY v/s Revenue decline of 4.8% QoQ (CC) was lower than our expectations.

The company saw a healthy improvement in its deal TCV (up 36% QOQ) and has healthy deal pipeline of US$1.5 billion. Also, Zensar's hi tech (46% of revenues) vertical saw an improvement of 3.5% QoQ (in CC terms) in the quarter, which is expected to further improve in coming quarters. This coupled with bottoming out of retail vertical, improvement in cloud revenues and ramp up of projects will lead to healthy improvement in revenues on coming quarters. The company has also hired Nachiketa Mitra (from cognizant) to boost its financial service (~26.6% of revenues) segment...

Background: Zensar Technologies is an RPG Group company, with end-to-end services from IT development to business process outsourcing. The company's business is spread across USA, Europe and Africa with around 308 active clients. The company's portfolio focuses on Hi-tech & manufacturing, retail and BFSI sectors. Zensar provides Analytics, Cloud & infrastructure, enterprise applications, digital experience and service line transformation...

Zensar Technologies Ltd (Zensar) reported a sluggish growth in Q4 FY20 due to COVID outbreak. Revenue stood at Rs. 1017.8 crs down 2.8% YoY and 0.3% QoQ. Operating profit showed a growth of 2.6% YoY at Rs. 100 crs

Retail, manufacturing sector to impact near term revenues Zensar expects retail (that contributes ~15% of revenues) to be severely impacted in the near term. In addition, we believe one of the company's top clients will report subdued result in the near term. This could impact the near term financials. Further, the company expects a ramp down in Hi Tech and some impact in insurance to be partially offset by banking. This, coupled with the book to bill ratio of 0.8x in Q4FY20, we expect the company to report declining revenues in the next two quarters and an improvement in...

COVID-19 uncertainty remained a key overhang on We upgrade our EPS estimate for FY21/22E by 9%/15% as (1) we rebase our exchange rate assumptions and adjust our margin trajectory post the beat In 4QFY20, revenue (USD)/EBIT (INR)/PAT decreased 5%/11%/20% YoY (v/s est. Africa grew 7% while EBIT margins posted a robust recovery to 9.8% (~700bp QoQ, higher than our optimization (200bp), (3) Change in service mix ( 80bp). The company does not see any need of goodwill impairment in its acquired Barring FY19 when Zensars overall revenue growth (including inorganic) came close to that of its mid-cap peers (mostly organic), the stock always traded at steep discount to the sector (~8-10x one-year forward P/E). Revenue declined ~1.5% QoQ (CC) due to (1) COVID impact (-4.5 pp), (2) change in revenue mix (-2 pp) and (3) abscence of one-offs which were there in 3QFY20 (+6% QoQ, CC), other verticals reported sequential decline.

The spread of Covid-19 has led to lockdowns in many countries globally and could have adverse economic implications. In addition, the recent fall in crude prices could also have an adverse impact of fiscal health of oil producing countries. As a result, IT companies, which have considerable exposure to verticals such as oil, energy & utilities; banking & capital markets; manufacturing and travel & transport could see an adverse impact from the ongoing crisis. Companies like Wipro, Infosys in large cap and MindTree, NIIT Tech, Sonata software, Cyient, Accelya Solutions among...

Background: Zensar Technologies is an RPG Group company, with end-to-end services from IT development to business process outsourcing. The company's business is spread across USA, Europe and Africa with around 308 active clients. The company's portfolio focuses on Hi-tech & manufacturing, retail and BFSI sectors. Zensar provides Analytics, Cloud & infrastructure, enterprise applications, digital experience and service line transformation...