Result Update: Zensar Technologies - ACCUMULATE - TP Rs.971 - Kotak

Zensar 3QFY18 revenue grew by 3.4% in dollar terms to USD122.6mn, above our estimate of USD120.6mn. EBITDA margins expanded by 187bps to 13.4% this was 90bps above our estimates. Margin expansion was driven by higher growth from Digital and efficiencies led by internal deployment of its return on Digital proposition. Digtial grew by 9% sequentially and now contributes 39% of total revenue for the company. We expect margins to improve marginally due to better operational efficiencies but would remain under a check from continued investments. PAT at Rs.591mn too was higher than our estimates due to overall operational beat. IMS business had a strong growth during the quarter whereas MVS business is still going through restructuring with primary focus on profitability improvement. 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 39%. Zen ROD (Return to Digital) a proprietary platform continues to gain momentum. With continues changes which are well reflected in higher growth in top clients and focus on profitability with increase in contribution from Digital offerings we upgrade to ACCUMULATE from REDUCE earlier. Our FY19E and FY20E EPS stand at Rs.67 and Rs.80.9 respectively. Our target price of Rs.971 discounts FY20 earnings by 12x.

Shares of ZENSAR TECHNOLOGIES LTD. was last trading in BSE at Rs.930.05 as compared to the previous close of Rs. 941.15. The total number of shares traded during the day was 814 in over 91 trades.

The stock hit an intraday high of Rs. 986 and intraday low of 924.05. The net turnover during the day was Rs. 757488.

Source : Equity Bulls

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