Zensar Technologies Ltd - REDUCE - TP Rs.855 - Result Update - Kotak

Zensar 2QFY18 revenue grew by 3.8% in dollar terms to USD118.6mn, above our estimate of USD117mn. EBITDA margins expanded by 140bps to 11.6% this was 160bps above our estimates in spite of wage hike (150bps impact during qtr), due to better operational efficiencies. Application margins improved to 14.2% from 13.9% in previous quarter. We expect margins to improve marginally due to better operational efficiencies but would remain under a check from continued investments. PAT at Rs.626mn was higher than our estimate of Rs.521mn led by overall operational beat and lower tax rate. Though 2H is expected to be better, we expect moderate growth led by active pruning of long tail accounts and pressure emerging out of the Oracle ATG ecosystem. Company is working towards becoming a 100% digital organization though it's a long aspirational target from here where the contribution from digital is still at 36%. Zen ROD (Return to Digital) a proprietary platform continues to gain momentum and booked business worth $1mn+ during the quarter. Company continues to lag in organic growth and we would wait till it starts delivering on the same. Our FY18 and FY19 EPS stand at Rs.56 (Rs.57.) and Rs.74.4 (Rs.74), respectively. We arrive at a price target of Rs.855 (Rs.839). We maintain REDUCE.

Shares of ZENSAR TECHNOLOGIES LTD. was last trading in BSE at Rs.875 as compared to the previous close of Rs. 873.1. The total number of shares traded during the day was 3316 in over 137 trades.

The stock hit an intraday high of Rs. 888 and intraday low of 850.4. The net turnover during the day was Rs. 2885797.

Source : Equity Bulls

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