The slowdown in the key business vertical viz. CIS may impact revenue upcoming quarters in the near terms. However total deal wins remained strong with $1bn which will aid higher growth momentum in longer run. We remainbullishonthebusinesstoregainitsmomentumbackedbylargedealswinsinlongerrun. Weassign11.3x P/E multiple to its FY21E earnings of Rs. 18.9 per share which gives a target price of Rs. 214 per share, an upside of 15%.
Factoring Q2FY19 performance, we have lowered our estimates to Rs 10.4 (earlier Rs10.8) and Rs 11.5 (earlier Rs11.6) for FY20E and FY21E, respectively. We continue to maintain our positive view on CDSL’s business model, having anannuity based revenue stream (opportunity is emerging with demat of 60-65k unlisted public companies with negligible costs), new growth avenues of Insurance & Academics yet to start contributing, as MHRD yet to decide the final pricing decision (as per the management), robust cash flow generation coupled with a strong balance sheet (Net cash of Rs 7.07bn) and stable dividend policy. At CMP, the stock is trading at 19.8x/17.9x FY20E/FY21E earnings. Given the limited upside, we recommend ADD (earlier BUY) with a revised target price of Rs223 (earlier Rs225), valuing CDSL on SOTP basis.
We expect Zensar to report an EPS of Rs.16.3/share in FY20E and Rs. 19.3/share in FY21E supported by strong deal pipeline. Revenue outlook remains strong on the back of the deal momentum of recent quarters. We maintain ADD rating with an unchanged target price of Rs.232. We have valued the stock at 12x PE on FY21E earnings, discount to its peers considering its size, financial performance, etc.
Zensar Ltd is well positioned in terms of providing IT services mainly targeting Digital services. The specific focus on verticals like manufacturing, Insurance and Retail will help to Zensar to gain higher growth momentum. When computed over FY19-FY21E, we estimate the company to post robust growth of 13% CAGR in revenues and 18% CAGR in earnings on the back of strong deal pipeline and higher demand for digital across geographies. We value Zensar Technologies Ltd at 13.8x FY21E (19.5/share) to arrive at price target of Rs.270 giving an upside of 23%
We expect Zensar to report an EPS of Rs.16.3/share (earlier Rs.16.7) in FY20E and an EPS of Rs. 19.3/share in FY21E (earlier Rs.19.8) supported by strong deal pipeline. Revenue outlook remains strong on the back of the deal momentum of the recent quarters. We maintain ADD rating with a revised target price of Rs.232 (Rs.267 earlier).
While we are positive about Zensar’s growth prospects given the strong revenue visibility in terms of strong growth in TCV and strong deal pipeline. We are also positive about Zensar’s focused strategy on it core areas of strength. However, we believe that margin improvement is still some quarters away, which might restrict upside movement in the stock. We rate Zensar “HOLD” with a target price of Rs. 242, upside of 12%. We value Zensar on 3-Yr historical average of 17.6x on FY21E EOPS of Rs. 13.8. Sustained weakness in Retail and slowdown in IT spending due to macro factors remain key risks to our call.
We believe execution holds the key to drive strong growth, which in turn will aid margin performance. Digital (48.5% of revenues) showed a sustained growth of 6.7% QoQ & 28.3% YoY on the back of clear focus on Automation driven by Cloud & Infrastructure platforms and RPA and we believe Zensar’s investment inReturn on digital is showing them results. We maintain our FY20E/21E USD revenue estimate and expects USD revenue and EPS CAGR of 13.4% and 20.8% respectively over FY19-21E. Our TP stands at Rs 260 (13x FY21E). The stock trades at attractive multiple of 13.3x/10.8x FY20E/FY21E EPS of Rs 16/Rs 20. Maintain Accumulate.
We remain positive on ZENT given a) strong digital capabilities aided by its Return on Digital (RoD) and RoD Next offerings. b) good revenue visibility with robust growth in TCV and strong deal pipeline and c) stable margin outlook with upside risks owing to increasing contribution of digital deals. We recommend “HOLD” on the stock with a target price of Rs. 270, and an upside potential of 13%. We value Zensar at PE of 18x on FY21E EPS of Rs. 15.6.
Management highlighted demand environment continues to be strong. Focus on large deals is also improving the quality of pipeline with 60% of deals (Q3FY19: 55%) being contested with TCV over USD 10 mn+. Digital (46% of revenues) showed a sustained growth of 8% QoQ & 36% YoY and we believe Zensar’s investment in Return on digital is showing them results. We raise our FY20E/21E USD revenue estimate by 2.1%/2.2% on revenue beat in Q4. We expect USD revenue CAGR of 12% over FY19-21E. Our revised TP stands at Rs 260 (13x FY21E) vs. Rs 256 earlier, implying 6% upside from CMP of Rs 246.The stock trades at 15x/12x FY20E/FY21E EPS of Rs 17/ Rs 20. Maintain Accumulate.
We maintain BUY on Zensar post better than expected 4QFY19. Growth in TCV (+25% YoY) and robust deal pipeline of ~USD 1bn provides growth visibility. Our TP is Rs 305 implying 16x FY21E EPS. Zensar is one of our Top picks in Tier-2 IT.
We are introducing FY21E earnings and roll-forward our valuation on FY21E earnings. We expect Zensar to report an EPS of Rs.16.7/share (earlier Rs.16.5/- ) in FY20E and an EPS of Rs. 19.8/share in FY21E supported by strong deal pipeline. Revenue outlook remains strong on the back of the deal momentum of recent quarters. We maintain ADD with a revised target price of Rs.267 (Rs.239 earlier).