Motilal Oswal's research report on Zensar
ZENT remains cautious given the weakening demand, especially from Retail, Manufacturing, and Technology, while the same from BFSI remains good. The management, at RPG’s annual investor conference, said it is aiming at mid-teen margin by 2QFY24. It also has a good M&A pipeline, with five deals on the table. The management is seeing signs of a softening in demand from clients. There is a visible slowdown in Retail, Manufacturing, and Technology. Tech companies have started to lay-off employees. As the business at large retailers is shifting towards cost-efficiency work, ZENT aims to be selective in its approach to avoid aggressive pricing behavior. Demand and order book from the BFSI space remains strong, given the Fed’s stance on interest rates. The management said the demand environment is similar to CY06. It has recently hired Mr. Manikandesh Venkatachalam (formerly with MTCL) to spearhead ZENT’s five strategic growth opportunities. In terms of geographies, Africa remains strong, although depreciation in the currency has acted as a drag for ZENT. It also has a good M&A pipeline, with five deals on the table.
Outlook
We expect a continuation in the revenue growth momentum in FY23. The new CEO-led leadership team is in place and its growth strategy has delivered results. The management expects margin to revert to the high teens over the medium term. With strong organic growth in FY23 and a recovery in key accounts, we see potential for a significant stock re-rating as valuations catch up with its peer group. Our TP implies 14x FY24E EPS. We maintain our Buy rating on the stock.
More Info
At 17:30 Zensar Technologies was quoting at Rs 222.50, down Rs 2.80, or 1.24 percent.
It has touched an intraday high of Rs 228.90 and an intraday low of Rs 222.00.
It was trading with volumes of 1,303,198 shares, compared to its thirty day average of 428,570 shares, an increase of 204.08 percent.
In the previous trading session, the share closed down 1.47 percent or Rs 3.35 at Rs 225.30.
The share touched its 52-week high Rs 550.00 and 52-week low Rs 221.65 on 20 September, 2021 and 10 August, 2022, respectively.
Currently, it is trading 59.49 percent below its 52-week high and 0.52 percent above its 52-week low.
Market capitalisation stands at Rs 5,036.59 crore.
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