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Zensar Technologies stock is trading near 52-week low, but brokerages see up to 72% upside

Zensar Technologies stock is trading near 52-week low, but brokerages see up to 72% upside

Zensar Technologies shares have been falling since the company announced its earnings for the quarter ended June 2022.

Zensar Technologies stock has fallen from Rs 247.6 on August 5 to Rs 232 today, translating into a fall of 6.30 per cent during the period. Zensar Technologies stock has fallen from Rs 247.6 on August 5 to Rs 232 today, translating into a fall of 6.30 per cent during the period.

Shares of Zensar Technologies were trading near their 52-week low today amid positive sentiment in the broader market. Zensar Technologies stock hit its 52-week low of Rs 221.65 on August 10, 2022. The IT sector stock was trading at Rs 232 today, down 0.87 per cent to the previous close of Rs 234.45.

Zensar Technologies shares have been falling since the company announced its earnings for the quarter ended June 2022. The stock has fallen from Rs 247.6 on August 5 to Rs 232 today, translating into a fall of 6.30 per cent during the period.

The earnings were announced after market hours on August 5.

Net profit fell 25.64 per cent to Rs 75.1 crore in Q1 against Rs 101 crore profit in June quarter of the previous fiscal.

However, sales rose 28.21 per cent to Rs 1,224.7 crore in the last quarter against Rs 955.2 crore in the corresponding quarter of the previous fiscal.

Earnings per share fell 25.21 per cent to Rs 3.29 in the June quarter against Rs 4.44 in the June quarter of the previous fiscal.

On a sequential basis, net profit declined 42.19 per cent from Rs 129.9 crore in the March quarter. Sales fell 0.11 per cent from Rs 1,226.1 crore in the March quarter of the previous fiscal.

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Even as the stock is trading near its 52-week low, brokerages are bullish on its prospects post Q1 earnings.

HDFC Securities has given a target price of Rs 315 against the market price of Rs 229 on August 8, implying an upside of 37.55 per cent.

"We expect dollar revenue growth of 12.2/10.1 per cent and EBITDA margins of 11.8/13.6 per cent for FY23/24E, resulting in revenue/EPS CAGRs of 11/5 per cent over FY22-24E. We maintain our BUY rating with a TP of Rs 315, based on 16x FY24E EPS. The stock is trading at a PE of  16/12x  FY23/24E  EPS,  a discount  of  50 per cent  to  the  mid-tier  IT median," said HDFC Securities.

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Way2Wealth Research has assigned a buy call to the stock with a target price of Rs 390 to Rs 400, implying an upside of 72.41 per cent to the current market price of Rs 232. It said the stock can be bought in the raneg of Rs 220 to Rs 230.

"We view margin improvement would be difficult to achieve given the supply-side constraints and return of costs like travel/facility. The company has been able to bring down its dependence on its top client and continues to add new logos. The management indicated that the company is well into execution phase of 'Strategy Refresh' and on track as far as gestation period of 4-8 quarters is concerned. Hence, we continue with our BUY recommendation with target range of Rs 390- Rs 400."

ICICI Direct has given a hold call to the stock.

"Zensar Technologies (Zensar) offers application & IMS services to hi-tech, manufacturing, retail and BFSI. Zensar has grown organically and inorganically over the years . It  is net debt free and has healthy double digit return ratio (with RoCE of 19 per cent). We change our rating on the stock from BUY to HOLD. We value Zensar at Rs 235 i.e. 14x P/E on FY24E," the brokerage said.

Prabhudas Lilladher is also optimistic about the stock of Zensar Technologies.

"Weak supply side engine coupled cut down or deferment of discretionary spends by clients in consumer, HiTech, and manufacturing verticals due to challenging macro environment are likely to limit earnings growth ahead. Our EPS estimates decrease by 12 per cent/9 per cent for FY23/24, led by cut in revenue by 3 per cent for FY24 and cut in margin estimates by 150bps/88bps for FY23/24. We continue to value Zensar on 13x on FY24 EPS to arrive at target price of Rs 253 (earlier: Rs 279). Zensar is currently trading at 17x/13x on FY23/24 EPS of 14.7/19.5 with revenue and EPS CAGR of 10 per cent and 3 per cent over FY22-24E. Maintain 'HOLD', " said the brokerage.