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Kotak Retains 'Accumulate' rating on Zensar Technologies
Posted On : 2012-10-18 20:02:12( TIMEZONE : IST )
Planned changes in revenue contributors and reduction in employees have led to a lower-than-expected 2Q. Product revenues are lower by about 21% QoQ. Services volumes were almost flat. The macro scene is uncertain but the management is positive on the pipeline and order bookings. The planned measures are targeted at improving the profitability profile of the company in the medium term. There is a short term impact, though. We view the profitability initiatives positively but will wait for the same to play out, especially as the macro scene is uncertain.
We view the business restructuring exercise with optimism. However, we would like to see atleast the initial gains from this, before becoming more positive on the stock. The uncertain macro may also lead to challenges.
Retain ACCUMULATE with a FY14 based DCF - based PT of Rs.305 (Re. 295 earlier, based on FY13E). Sustained rise in margins and stable revenue growth profile may lead us to accord higher valuations to the stock.
