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Last Updated : Aug 09, 2019 04:18 PM IST | Source: Moneycontrol.com

Accumulate Zensar Technologies; target of Rs 260: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Zensar Technologies with a target price of Rs 260 in its research report dated August 07, 2019.

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Prabhudas Lilladher's research report on Zensar Technologies


Zensar delivered steady performance in Q1FY20 with marginal miss on revenues negated by strong beat on margins. Zensar posted revenue growth of 3.1% QoQ USD at US$ 153.3mn (Ple: US$154.6mn. Cons: US$156mn) slight below our estimates but EBITDA margin came at 14.2% vs our estimates of 12%. Strong revenue growth in cloud infrastructure business(CIS) of 17.3% QoQ CC contributed to revenue growth & aided margin growth as CIS is a high margin business (Ple:19%). Zensar recorded total bookings of
~USD 160 mn+ in Q1, with (FY19 bookings at USD 750 mn+) majority of wins in CIS business. Client mining strategy is yielding healthy results with Top 5/10/20 clients growing 6.0%/5.9/6.5% QoQ. While momentum has picked up, softness in Retail (ramp-down at two clients coupled with delay in ramp-up of a deal) is likely to keep momentum in the vertical muted. We believe execution holds the key to drive strong growth, which in turn will aid margin performance. Digital (48.5% of revenues) showed a sustained growth of 6.7% QoQ & 28.3% YoY on the back of clear focus on Automation driven by Cloud & Infrastructure platforms and RPA and we believe Zensar's investment in Return on digital is showing them results. We maintain our FY20E/21E USD revenue estimate and expects USD revenue and EPS CAGR of 13.4% and 20.8% respectively over FY19-21E.


Outlook


Our TP stands at Rs 260 (13x FY21E). The stock trades at attractive multiple of 13.3x/10.8x FY20E/FY21E EPS of Rs 16/Rs 20.
Maintain Accumulate.


For all recommendations report, click here

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First Published on Aug 9, 2019 04:18 pm
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