Comments
Axis Securities
Zensar Technologies (Add)
CMP: ₹176.1
Target: ₹200
Zensar Technologies Q3 results were a steep disappointment on revenues and EBIT margin. Steep weakness in Retail & CPG verticals, which has seen revenue decline by 21 per cent per cent and 31 per cent y-o-y weighed on performance. Management cited that it has pruned eight tail accounts in Retail vertical, which are non-strategic and cited that this one-off impact as the reason for steep revenue fall. Led by tepid 3QFY20 revenues, we downgrade Zensar’s USD revenue growth assumptions to deliver 5.2/5.3 per cent USD revenue growth in FY20/FY21E (vs 9.6/10.6 per cent modelled earlier).
Organic USD revenue growth in FY20E would be 4.5 per cent and the rest owing to the full impact of IndigoSlate acquisition. Higher exposure to project-based service offerings is leading to revenue volatility for Zensar in our view. While TCV wins have been steady, we believe building more annuity multi service deals and increasing effort mix in favour of offshore is key for performance to stabilize. We also downgrade EBIT margin assumptions to 7.5/9.7 per cent for FY20/FY21E (vs 11.1/11.7 per cent earlier).
Led by USD revenue downgrade as well as margin downgrade we lower our EPS estimates by 27/27/18 per cent for FY20/FY21E/FY21E.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.