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Buy Zensar Technologies, target Rs 340: Elara Capital


Elara Capital has given a buy recommendation on Zensar Technologies with a target price of Rs 340.

Shares of Zensar Technologies traded at Rs 256.9 around 2:25 pm on 14 June, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.

The brokerage interacted with senior management of Zensar Technologies at the RPG analyst day and learned that the turnaround in cloud and infrastructure services (CIS) is now being attempted in retail.

“The management says of the total $750 million orderbook won in FY19, $300 million was from CIS, taking CIS to book-to-bill of 3.4 times. We believe this is a significant development, given the CIS business had won its first major cloud and new generation infrastructure contract in 4QFY18 with an $80 million win with the City of San Diego, California, the US,” said the brokerage.

The management affirmed four acquisitions, that the company has made, have scaled up well and employee numbers for two acquisitions, Foolproof and Cynosure, have increased significantly.

As per the brokerage, CEO Sandeep Kishore also attributed significantly higher orderbook in FY19 partly to better positioning that has been provided by these four acquisitions.

Improved positioning and credentials set by deals, such as the $80 million deal with the City of San Diego, has helped Zensar Technologies bolster its pipeline to more than $1 billion as on June 2019.

“With increased confidence in management’s ability to improve lagging parts of the portfolio, we change our rating to buy from accumulate with a new target price of Rs 340 from Rs 280 based on 13 times (from 15 times FY20E) FY21E P/E. We assign a lower multiple as we look at earnings further out into the future,” said the brokerage.

“We have not taken into account the divesture of the non-core multi-vendor support (MVS) segment that accounted for 4.8 per cent of revenue in FY19 due to uncertainty regarding timing of the divesture,” the brokerage added.





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