Zensar Technologies (Zensar) offers application & IMS services to hi-tech, manufacturing, retail and BFSI. The company has grown organically and inorganically over the years with net debt free and healthy double digit return ratio (with RoCE of 19%), highlighted brokerage house ICICI Securities.
Zensar’s share price has grown by around 2.6 times over the past five years (from around ₹175 in December 2016 to ₹ ₹470 levels in December 2021). The brokerage firm remains positive on the multibagger stock, that is up around 115% this year, and has maintained Buy rating. It values Zensar at ₹565 per share (target price) with a target period of around twelve months.
“Zensar is addressing key shortages of the past. The new CEO has devised a strategy to focus on the experience side and build capabilities in digital engineering, data, artificial intelligence and machine learning,” ICICI Securities said in the note.
Driving deal momentum, annuity revenues, increasing investment in sales & talent, leadership and tuck-in acquisition to build capability bode well for long term revenue growth. Expect dollar revenue CAGR (compound annual growth rate) of 11% over FY21-23E which could act as key triggers for future price performance, as per the brokerage.
Zensar Tech has seen healthy client addition in Q2FY22. Client mining and new logo additions are expected to scale up revenues further. Margins improved from 14.8% in FY16 to 18.1% in FY21 due to higher offshoring and lower employee costs. The improvement in margin trajectory is also expected to continue.
Apart from Zensar, in its IT coverage, ICICI Securities said it also likes Infosys on key beneficiary of improved digital demand, industry leading revenue growth and healthy capital allocation prompt us to be positive. Its Buy tag on Infosys shares comes with a target price of ₹2,060 apiece.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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