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IDBI Capital Report
Zensar Technologies Ltd.'s strong Q2 growth in profitability was led by one off reversal of bonus of 190 basis points. In addition, the company's deal wins of $194 million (1.3 times book to bill) had some spillover of Q1 and pre deal wins of Q3.
Hence, normalised Ebitda margins stood at 17% and order book could be lower than reported.
This coupled with company's intention to invest in capability building, sales and large deals, we have tapered our expectation for FY25E margins to 16.7% (down 140 bps from 18.1% in FY24E).
As a result we maintain our earnings per share expectation for FY25E. In addition, we believe that we are yet to see some growth acceleration from Zensar Technologies' end.
Hence, with recent run up in price prompt us to downgrade the stock from 'Buy' to 'Hold' with same target price of Rs 530 (18 times FY25E earnings per share).
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