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Zensar Q4FY14 results update

April 25, 2014, Friday, 14:31 GMT | 10:31 EST | 19:01 IST | 21:31 SGT
Contributed by Nirmal Bang

Zensar reported Q4FY14 numbers in-line with our expectations wherein USD Revenues grew by 2.2% led by good growth seen in the enterprise business which grew 6% QoQ. During the quarter, the IM Products business de-grew by 13% and the management consciously plans to reduce it more. ZTL’s share is trading at attractive valuations of 6.4x and 5.4x its expected earnings for FY15E and FY16E. With improvement in the deal pipeline, we continue to remain positive and have a BUY recommendation on the stock.

Financial Highlights:

- INR Revenues for the quarter grew 1.78% QoQ to Rs.603 crore on the back of robust growth seen in the Application management which have grown by 6.5% QoQ basis. This business grew by 9% QoQ in US and by 16.3% QoQ in Europe.

- IM and Products business continued to be laggards. Company is in the process of shutting down some data centres in onsite businesses and adding up some new technology related services in the IM business. Company is increasing thrust in the IM business by providing dual shore services and is consciously reducing the products business.

- EBIDTA margins grew 80 bps QoQ to 15.5% and company expects them improve significantly in FY15 with contribution from the IM business improving.

- For the quarter, Zensar incurred forex loss of Rs.13.4 crore against a loss of Rs.8.6 crore in the previous quarter.

- Adjusted PAT grew by 15% QoQ to Rs.65.6 crore for the quarter.

- Order pipeline continues to be stable at ~ $ 270 mn mainly on the back of good demand seen in Mobility, Cloud Computing and social networking side.

FY14 details:

- INR Revenues grew by 9.5% YoY to Rs.2316 crore and USD revenues fell by 1.6% YoY with application services growing 10% YoY and IMS declining by 8.6% YoY.

- EBIDTA margins grew by 100 bps to 15.3%.

- Company made a forex gain of Rs.20.5 crore in FY14.

- Adjusted PAT has grown by 26.4% YoY to Rs.223 crore on the back of lower tax rate.