Management Meet Update - Zensar Technologies - CSEC Research

Transformation underway

- We recently attended the analyst meet conducted by Zensar Technologies and came back with the view that company's focus on large deals and Digital business would drive growth, going forward.

- The company is witnessing significant decline in traditional services; however, its growth in digital business was impressive, a growth of 59% CAGR in past 2 years. Zensar is re-inventing its traditional services offerings and company is trying to transform as a complete digital company.

- The global spending on traditional IT services is expected to fall by USD 450-650bn where as global digital spending is likely to increase by USD 950-1,100bn by FY20. During FY15-17, company's traditional services witnessed decline of 7.3% CAGR due to lower spending.

- Management indicated that decline in traditional services will continue for next few years. To overcome this Zensar is reinventing its offering and investing heavily in new technologies.

Valuation Management refrained from guidance on growth trajectory on the new business strategy. Due to uncertainty in growth recovery in near time, we slash our P/E multiple on the stock. At CMP, the stock trades at 14.5x/11.8x of FY18/19E EPS. We value the stock at a P/E of 13.0x FY19E EPS with a target price of INR 962 and rate stock an OUTPERFORMER (earlier BUY). Risks: Unfavorable cross currency movement & delay in the deals.

Shares of ZENSAR TECHNOLOGIES LTD. was last trading in BSE at Rs.869.7 as compared to the previous close of Rs. 869.4. The total number of shares traded during the day was 2423 in over 254 trades.

The stock hit an intraday high of Rs. 872.7 and intraday low of 865.2. The net turnover during the day was Rs. 2106621.

Source : Equity Bulls

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