Neutral Zensar; target of Rs 164: Motilal Oswal

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Motilal Oswal 's research report on Zensar

Zensar’s better-than-expected revenue and EBIT margin in 1Q were encouraging. This was led by stronger-than-expected growth in the Hi-Tech vertical and aggressive cost rationalization. The company shared a cautiously optimistic outlook for a stable 2Q and growth in 2HFY21. Commentary around defending margins, healthy deal wins (USD150m), and a robust pipeline are other key positives. We upgrade our EPS estimate for FY21/FY22E by 5%/0% as we adjust our revenue growth assumptions and margin trajectory post the beat during the quarter. Maintain Neutral.

Outlook

On our revised estimates, the stock is trading at ~10x FY21E EPS, which is toward the higher end of its trading band. We value the stock at ~10x FY22E EPS.

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