Zensar Technologies stock rises 10% to hit 52-week high

Shares of Zensar Technologies continued to witness gaining momentum for the second straight session, rising as much as 10.5% on Monday, to hit an intraday high of ₹375.35 apiece on the BSE, as brokerage firms revised the target price after the company posted a jump in its net profit for the January-March quarter.

On Monday, the share price of the Noida-based IT firm opened higher at ₹341.05 apiece on the BSE as against the closing price of the previous session at ₹339.65. In the last five sessions, the stock has surged 19%. During the session, the company’s market capitalisation stood at ₹8,465.28 crore, with 4,35,624 shares exchanging hands on the BSE, higher than the two-week average of 1.46 lakh shares. Currently, the share price of Zensar Technologies is trading 46.1% higher than a 52-week low of ₹202, which the company touched on December 23 last year. The company’s EBITDA (earnings before interest, taxes, depreciation and amortisation) in the March quarter, increased by 320 basis points to 14.5%. During the quarter under review, the company’s attrition rate stood at 19.8%, which is an improvement of 810 basis points.

In the March quarter, the net profit of Zensar Technologies surged as much as 55.8% quarter-on-quarter (QoQ) to ₹119.2 crore. During the quarter under review, the company’s revenue from operations grew 1.1% QoQ. In constant currency terms, the revenue surged 0.4%. During the quarter under review, the gross margin of the company stood at 31.9% of revenues, representing a sequential increase of 460 basis points. In the March quarter, PAT (profit after tax) of the company stood at 9.8% of revenues, a sequential QoQ increase of 340 basis points. The company’s net sales stood at ₹1,213 crore. The board has recommended a final dividend of ₹3.50 per equity.

Following the March quarter results, brokerage firms have revised the company’s target price. Analysts at HDFC Securities have maintained a 'BUY' rating for Zensar Technologies and revised the target price of ₹445. "The strong and sustainable margin improvement during the quarter was on account of lower sub-contracting, higher utilization, better productivity & business mix (lower pass-through) and FX. Margins are now expected to be in the range of mid-teens level, supported by continued gains in productivity—subcontracting expenses, pyramid rationalisation and utilisation improvement, going forward," the brokerage firm says.

"We have factored in EBITDAM of 14.3/14.7% for FY24/25E respectively (at Q4FY23 levels). Softness in consumer services, banking and emerging verticals was offset by a recovery in insurance, hi-tech and manufacturing verticals. The management expects challenges in consumer and hi-tech verticals going ahead and cited the uncertainty in the current demand environment with delay in decision[1]making. While deal bookings provide growth visibility, we trim our revenue estimate by 2-3%, factoring challenges in hi-tech and consumer verticals; but increase EPS estimates by ~15% supported by a better operational trajectory for FY24/25E," it adds.

Meanwhile, analysts at ICICI Direct have maintained a 'HOLD' rating for Zensar Technologies stock with a target price of ₹370. The brokerage firm expects the company's revenue to grow at a CAGR of 8.4% over FY23-25E. "The company has added four services lines in the recent one to one and a half years, which has increased the addressable market and subsequently revenue growth opportunities • Moderation of subcontractor costs, which is expected to be one of the levers for margin expansion apart from pricing, utilisation improvement, more offshoring, etc," ICICI Direct says in a note.

Motilal Oswal has revised the target price to ₹390, whereas Nuvama has lowered the target price of the stock to ₹340.

(Disclaimer: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)