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 decisionmaking. 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.
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