Zensar Technologies Q2FY14 results update
January 6, 2014, Monday, 12:11 GMT | 08:11 EST | 17:41 IST | 20:11 SGT
Zensar reported Q2FY14 numbers ahead of our expectations wherein the IT services business in USD terms has grown by 3.1%. In constant currency terms this growth is ~ 5.2%. Management expects good growth starting from Q4FY14 with its Infrastructure Management (IM) business gaining momentum. ZTL’s share is trading at attractive valuations of 4.7x PE and 2.4x on EV/EBIDTA of its FY14E earnings. With improvement in the deal pipeline, we continue to remain positive and have a BUY recommendation on the stock.
- INR Revenues for the quarter grew 12.4% QoQ to Rs.600 crore on the back of robust growth seen in the Application management which have grown by 16% QoQ basis. In USD terms, this business grew by 5.4% on the back of larger deal sizes, increase in demand for new technologies and up-gradation of clients from Oracle 11.0 to 12.0 version. IM and Products business continued to be laggards and are expected to show growth from Q4FY14 onwards. 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.
- EBIDTA margins grew 320 bps QoQ to 17.1%. Despite wage hike of ~ 7% given to offshore employees margins improved aided by currency benefits and higher offshore share in the revenues.
- For the quarter, Zensar incurred forex gain of Rs.14.5 crore against a gain of Rs.28 crore in the previous quarter.
- Tax rate continued to be on a higher side at 33.7%, though company plans to trim it down by moving business into SEZ.
- Adjusted PAT grew by 28% QoQ to Rs.61.1 crore for the quarter.
- Order pipeline continues to be stable at ~ $ 200 mn mainly on the back of good demand seen in Mobility, Cloud Computing and social networking side.
- Company is seeing good growth in African and Middle East regions and is seeing slowdown in Japan and Singapore markets.
- Company has spend a capex of Rs.19 crore on capex and carries loan and cash of Rs.234 crore and Rs.263 crore respectively.