HDFC Securities is bullish on Zensar Technologies has recommended buy rating on the stock with a target price of Rs 300 in its research report dated January 22, 2019.
HDFC Securities' research report on Zensar Technologies
Zensar delivered robust revenue growth but margin performance was subdued. Revenue stood at USD 143.7mn (+4.0% QoQ, +4.5% CC) higher than our estimate of USD 141mn led by core business (+6.0% QoQ). Growth was led by sustained recovery in Cloud and Infrastructure Services (CIS) business (+16.9% QoQ, 17% of rev). EBITDA margin was below our estimate, contracted 204bps to 10.8% led by large deal transition impact, higher sub-con expenses and drop in utilisation. Core Services margin dropped 230bps to 12.7% while non-core margin stood at -18.8% (-608 bps QoQ). Management expects core business margins to gradually recover to 14-15% when large deals reach steady state.
Outlook
We build 13/20/20% Revenue/EBITDA/PAT CAGR over FY19-21E. Maintain BUY with a TP of Rs 300 based on 16x Dec-20 EPS.
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