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Buy Zensar Technologies; target of Rs 371: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Zensar Technologies has recommended buy rating on the stock with a target price of Rs 371 in its research report dated May 12, 2022.

May 14, 2022 / 01:19 PM IST

"India’s specialty chemicals industry is a decadal growth opportunity and it is still not too late to participate in the value creation process. We prefer CRAMS/CSM players Navin Fluorine (Navin) and PI Industries (PI) as they provide long-term earnings visibility. We also like UPL due to robust growth outlook and reducing debt concerns and SRF due to rising contribution from the chemicals business," JM Financial research report.

 
 
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Prabhudas Lilladher's research report on Zensar Technologies


Zensar reported strong revenue beat of USD153.2mn, 4.2% QoQ CC, +4.1% QoQ USD (Ple: 2%, Cons: 2%), thereby consistently delivering healthy revenue growth for four consecutive quarters. It is on-track in management’s aspiration of delivering sustainable, consistent and predictable growth. Revenue growth momentum is expected to sustain, given strong headcount addition (11% QoQ, 45% YoY) and deal wins (+32% QoQ, +66% YoY) in Q4. However, margins are expected to remain under pressure in FY23 due to weak exit margins (flat QoQ, -474bps YoY), very high attrition levels (LTM attrition at 27.9%, Quarterly attrition down QoQ) and investments for growth. Our EPS estimates decrease by 8%/3% for FY23/24, led by decrease in margin estimates.


Outlook


We value Zensar at earnings multiple of 16x (earlier:19x) factoring in sharp decline in margin profile, lower than industry growth and increased risk free rates. With FY24EPS of INR 23.2, we arrive at a changed TP of INR 371 (earlier: 453). Zensar is currently trading at attractive multiples of 16x/13x on FY23/24 EPS of 18.7/23.2 with revenue and EPS CAGR of 16% and 12% over FY22-24E. Maintain ‘BUY’.


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first published: May 14, 2022 01:19 pm
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