Prabhudas Lilladher recommended accumulate rating on Zensar Technologies with a target price of Rs 260 in its research report dated May 05, 2019.
Prabhudas Lilladher's research report on Zensar Technologies
Zensar's Q4FY19 was a beat on revenue at USD 150mn (Ple: USD 145mn) up 4.5% QoQ (4.1% cc terms). EBITDA margin improved by 134 bps QoQ to 12% (PLe: 11%) aided by operating leverage driven by stronger than expected growth offsetting INR appreciation. Core business recorded 14% EBITDA margin and management is targeting to scale it to 15% in FY20. Zensar's organic growth has improved (+11.5% in FY19) led by robust deal wins. Total TCV for the quarter stood at USD 250mn (+25% QoQ) and USD 750mn in FY19 (vs USD 600mn in FY18). Management highlighted demand environment continues to be strong. Focus on large deals is also improving the quality of pipeline with 60% of deals (Q3FY19: 55%) being contested with TCV over USD 10 mn+. Digital (46% of revenues) showed a sustained growth of 8% QoQ & 36% YoY and we believe Zensar's investment in Return on digital is showing them results. We raise our FY20E/21E USD revenue estimate by 2.1%/2.2% on revenue beat in Q4.
Outlook
We expect USD revenue CAGR of 12% over FY19-21E. Our revised TP stands at Rs 260 (13x FY21E) vs. Rs 256 earlier, implying 6% upside from CMP of Rs 246.The stock trades at 15x/12x FY20E/FY21E EPS of Rs 17/ Rs 20. Maintain Accumulate.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Read More
