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Zensar

Zensar rose 2% post company announces stock split

Zensar Technologies’ board approved stock split in the ratio of five shares for every one share held.
Shares of the Pune-based software developer, Zensar Technologies, rose as much as 2% to record high of Rs1,180 after its board approved stock split in the ratio of five shares for every one share held.
Zensar Technologies Ltd is currently trading at Rs1,163.95 up by Rs9.25 or 0.8% from its previous closing of Rs1,154.70 on the BSE. The scrip opened at Rs1,159.80 and has touched a high and low of Rs1,180 and Rs1,057 respectively. So far 1,46,823 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs5,193.85cr. The stock is currently trading above its 50 DMA.

Zensar Technologies, a RPG group company, is a prominent IT services provider in India. Geographically, the company derived 73.3% of its revenue from US, Europe 13.5% and Africa ~10% as on Q3YF18. Industry-wise, the revenue stream comprises of the manufacturing sector (49.4%), retail sector (28.5%) and financial services (19.6%). The company has an impressive deal pipeline of USD700-800mn as on Q3FY18.

We are positive on Zensar on account of its strategy to expand footprint in the digital solutions space (now constitutes ~39% of overall revenues). It has built strong capabilities in Digital/SMAC space, and are well infused in top-clients resulting ina robust deal pipeline. The acquisition of Foolproof and Keystone have expanded its addressable markets and are expected to aid in company’s revenue growth. We forecast revenue CAGR of 8.1% over FY17-20E on above-mentioned drivers. IMS business recovery post restructuring in maintenance in FY18E and stronger performance in services will lead to margin expansion of 134bps over FY17-20E. Thus, we expect the company to post 16.4% PAT CAGR over FY17-20E.