Zensar Technologies - Company Update - ICICI Securities

Zensar Technologies (Zensar) reported Q1FY21 numbers. Dollar revenues fell 7.0% QoQ mainly due to a decline in retail & financial vertical that dipped 23% QoQ, 14% QoQ. However, EBIT margins increased 20 bps to 10.0% mainly led by forex gain (40 bps), SG&A optimisation (20 bps) partially offset by lower utilisation. The other key positive was fall in debt by ~US$15.5 million (~Rs. 116 crore) QoQ and DSO days dipping by 12 days QoQ to 75 days. The company saw order booking of US$150 million in the quarter (book to bill ratio of 1.15x) and also has healthy deal pipeline (US$1.5 billion).

Valuation & Outlook

The company witnessed healthy traction in order booking. 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. Further, with healthy cash in balance sheet we expect it to pursue inorganic acquisition. Hence, we expect Zensar to register improving revenue growth in long term. Further, we expect the company to witness improved traction in margins. Hence, we revise our target price upwards to Rs. 155/share (10x FY22E PE). However, considering recent run up in price we maintain HOLD rating on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Zensar_CoUpdate_Jul20.pdf

Shares of ZENSAR TECHNOLOGIES LTD. was last trading in BSE at Rs.144.35 as compared to the previous close of Rs. 140.3. The total number of shares traded during the day was 29829 in over 707 trades.

The stock hit an intraday high of Rs. 145.55 and intraday low of 139.55. The net turnover during the day was Rs. 4274890.

Source : Equity Bulls

Keywords