zensar ltd initiating coverage 310315 - gepl have strong solution base which provide a different it...
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Equity | India | IT Services
Zensar technologies Ltd.(Zensar)
Zensar the growth…… October 30 ,2015
BUY
Analyst Omkar Tanksale
+91-22- 6614 2692 [email protected] Institutional Research 1
Initiating Coverage
CMP (`) Target (`)
960 1,166
Potential Upside Absolute Rating
21% BUY
Market Info (as on October 30, 2015)
BSE Sensex 26,656.83
Nifty S&P 8,065.80
Stock Detail
BSE Group B
BSE Code 504067
NSE Code ZENSARTECH
Bloomberg Code ZENT.IN
Market Cap (`bn) 43.92
Free Float (%) 29%
52wk Hi/Lo 1020 / 563.90
Avg. Daily Volume (NSE) 156503
Face Value / Div. per share (`) 10.00 / 6.50
Shares Outstanding (mn) 44.4
Shareholding Pattern (in %)
Promoters FIIs DII Others
48.03 13.93 0.59 37.45
Financial Snapshot (`mn)
Y/E Mar FY14 FY15 FY16E FY17E
Net Sales 23,349 26,557 29,361 33,471
EBITDA 3,580 3,917 4,446 4,778
PAT 2,375 2,646 2,961 3,126
EPS 52.9 59.0 65.7 69.4
ROE (%) 25% 23% 21% 20%
ROCE (%) 33% 31% 30% 29%
P/E 17.45 15.86 14.61 13.83
EV/EBITDA 10.16 9.57 7.53 6.68 Share Price Performance
Rel. Perf. 1Mth 3 Mths 6Mths 1Yr
Zensar (%) 26.7 12.6 44.0 60.8
Sensex (%) 4.1 (2.6) (1.4) (1.0)
Source: Company data, Institutional Research
Company Snapshot
Zensar Technologies Ltd. (Zensar) is the part of the RPG group of companies. The RPG group is one of the largest groups of companies in India. Zensar is a midsized IT company for global organizations looking to strategically transform, grow, and lead in today’s challenging business environment. The Company has a services portfolio that ranges from the traditional to the transformational - across service lines of Management Consulting, Business Application Services, Enterprise Solutions, Enterprise Collaboration Services, Testing and Assurance Services, BPM and Infrastructure Management Services. Investment Rationale
Robust Services portfolio makes company strong player in Digital services
Wide range of vertical coverage like e-commerce, Enterprise Application, custom application,
infrastructure management, product engineering etc. This also helps to improve the productivity of the business which helps to empower people with right information at right
time. Digital space is the key revenue driver for the zensar. The company has developed
strong resources and specializing applications. Zensar help their clients to improve e-
commerce, helping them to manage their recourses, also help to manage their infrastructure. This provides edge to Zensar over other IT services company and makes more lucrative
company in terms of robust business structure.
Industry focus solutions makes business structure more robust
Zensar have strong solution base which provide a different IT solution for their business. This
niche business structure provides an edge to zensar which makes them more lucrative for longer run horizon. This also makes company a different IT company from the other IT
companies. Zensar have specialized business solutions among different sector. The company
provides IT solutions among different business process which makes their client to refine the
business process and makes its business more efficient. The company has different process solution in the manufacturing sector like service opportunity management, customer
experience management, connected shop floor etc.
Strong business strategy to attain the top line
Zensar has strong domain focus among the sectors like manufacturing, retail and insurance sector. The company has larger revenue coming from these sectors. This niche segmentation
of the revenue makes zensar a different IT service company than other traditional IT
companies. Zensar has also a strategy to focus on three different areas of business viz. Digital Enterprise, Infrastructure management and Application management. However now company
is now focusing on high realization service offerings like digital services. Long term contracts
gives the guarantee to the revenue over longer run horizon makes Zensar more sustainable in
the adverse conditions or economic slowdown.
Valuation
At the CMP of `960, Zensar is trading at 14.6x, and 13.6x its FY16E, and FY17E EPS of `65.7
and `69.4. Compared to its peers; Zensar is trading at a discount P/E multiple, although its margins are better than or comparable to peers. We initiate coverage on Zensar Technologies
Ltd with a BUY rating and attach a multiple of 16.8 xs to Zensars’ FY17E earnings (EPS) to
arrive at the target price of `1,166, indicating a potential upside of 21%.
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Zensar Technologies Ltd BSE SENSEX
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 2
Index & Content
Sr. No. Topic Page No.
1 Company Background......................................... 3
2 Business Model................................................. 4
3 Key Management Personnel.................................. 5
4 Investment Rationale......................................... 6
5 Financial Overview........................................... 10
6 Key Risks........................................................ 14
7 SWOT Analysis.................................................. 15
8 Michael Porter’s Five Force Analysis........................ 16
9 Valuation & Outlook........................................... 17
10 Financials........................................................ 18
11 Disclaimer....................................................... 19
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 3
Company Background
Zensar Technologies Ltd. is the part of the RPG group of companies. The RPG group is one of the largest group of companies in India. RPG group has presence over 100 companies. They
hold one of the biggest brands like CEAT, KEC Infrastructure, and also have strong presence in the field of the pharmaceutical, power etc.
Zensar Technologies is a midsized IT company for global organizations looking to strategically transform, grow, and lead in today’s challenging business environment. The Company has a
services portfolio that ranges from the traditional to the transformational - across service lines of Management Consulting, Business Application Services, Enterprise Solutions, Enterprise
Collaboration Services, Testing and Assurance Services, BPM and Infrastructure Management
Services. Zensar’s experience across industries of Retail, Manufacturing, Insurance, Banking, Healthcare and others translate into a differentiated value proposition and faster time-to-
market for clients. Company capability in infrastructure-oriented services ranges from remote
infrastructure management to end user computing to data centre services and security and
compliance. Zensar is now leading the way in powering next-generation enterprises with its cloud, mobility and social media solutions. Zensar is the world's first enterprise-wide SEI CMM
Level 5 Company. Zensar operates in the US, Europe, Africa, Middle East, Singapore and
Australia regions and has delivery centers in India (Pune, Hyderabad and Bangalore), China, UK, Amsterdam and US (Westborough) Company is backed by a strong track-record of
innovation, over 8000 associates and footprint in 29 global locations, comprehensive range of
software services and solutions enable its 400+ forward-looking customer to cross new
threshold of business performance.
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 4
Business Model
Zensar tech operates under the three main verticalsof IT services, Application Management services, Infrastructure Management & Digital Enterprise.
IT services is the segment from which major revenue come from. Company has rich experience
in the application management. The company provides variety of services to its clients and makes its client more efficient in its business. Zensar specialized in Business application
services, Enterprise solutions, process consulting, product engineering, Cloud services,
Business intelligent and data warehousing etc. These specialized services make Zensar a
strong player in the field of IT enabled services. The contribution from Application management revenue has increased from 63% in FY12 to 71% in FY15.
Infrastructure Management is another segment from which company is having decent amount
of revenue. Company has the capability of onsite as well as remote IT infrastructure management & technical support for the companies. IT infrastructure services include data
center management, Multivendor support services, Network infrastructure etc. However,
revenue contribution has declined from 37% in FY12 to 20% in FY15. We believe that in the
upcoming period contribution from the segment will likely to improve.
Company has entered into a new segment i.e. Digital enterprise solution in last couple of years. Revenue from this business has grown from 5% in FY14 to 13% in FY15. Company expects
contribution from this business to touch 20% by FY17 end.
The Company has a services portfolio that ranges from the traditional to the transformational across service lines of Management Consulting, Business Application Services, Enterprise
Solutions, Enterprise Collaboration Services, Testing and Assurance Services, BPM and
Infrastructure Management Services. Zensar’s experience across industries of Retail, Manufacturing, Insurance, Banking, Healthcare and others translate into a differentiated value
proposition and faster time-to-market for clients.
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 5
Key Management Personnel
Zensar Tech has sound management personnel which helps company to attain desire growth
over the period of time
Dr. Ganesh Natarajan: Dr. Ganesh Natarajan is Vice Chairman & CEO of Zensar Technologies,
a leading firm that optimises technology and processes for Fortune 500 companies. He was
Chairman of NASSCOM in 2008 and is a member of the Chairmen’s Council of NASSCOM. He is also a fellow of the Computer Society of India.
Vivek Gupta: Vivek has a B.Tech degree from India's premier engineering college, the Indian
Institute of Technology, Delhi. He joined Zensar in 1984 as a management trainee and holds the unique distinction of being the longest serving campus recruit in the company. Vivek has
performed a number of roles around the globe, including heading all delivery operations,
before taking over his current role as Chief Executive and Head, Global Infrastructure Management Services
Nitin Parab : Nitin is the Chief Executive and global head of Zensar’s Manufacturing, Retail,
Insurance, Banking and Health care Industry vertical businesses. Whilst based in US for almost 2 decades, Nitin has deep experience in managing operations (Business Development,
Marketing, Solution Design, Service Delivery, Technology Practices, Alliances and Partnerships)
in several countries across all continents.
Pinak Kar: Pinaki Kar who joined Zensar as the Infrastructure Business Unit Head. In his last
role, Pinaki was CEO & President of Wipro Infocossing. His responsibilities included
transformation of the business to a higher growth path, incubating Cloud Computing, expanding into Europe and APAC.
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 6
Investment Rationale Robust Services portfolio makes company strong player in Digital services
Service portfolio
Source: Company data, Institutional Research
The company has technical expertise that also understands business and makes company more
efficient in its business. Wide range of vertical coverage like e-commerce, Enterprise
Application, custom application, infrastructure management, product engineering etc. This also helps to improve the productivity of the business which helps to empower people with
right information at right time. Digital space is the key revenue driver for the zensar . The
company has developed strong resources and specializing applications. This enables zensar a
key player in the digital space. Majority of the companies from different verticals are now focus on digital infrastructure which makes them more efficient in the business. Zensar help
their clients to improve e-commerce, helping them to manage their recourses, also help to
manage their infrastructure. This provides edge to Zensar over other IT services company and makes more lucrative company in terms of robust business structure.
We believe that digital services will likely to improve with the greater momentum than other
services. This will also help to improve their man hour billing charges in the upcoming period.
Improvement in the realization will likely to impact on the operating margins positively. This also makes Zensar a more efficient company.
Digital Enterprise
Custom Applications
Infrastructure Management Product
EngineeringE-Commerce
EnterpriseApplications
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 7
Industry focus solutions makes business structure more robust
Zensar have strong solution base which provide a different IT solution for their business. This niche business structure provides an edge to zensar which makes them more lucrative for
longer run horizon. This also makes company a different IT company from the other IT
companies.
Industry focus solutions
Source: Company data, Institutional Research
Zensar have specialized business solutions among different sector. The company provides IT
solutions among different business process which makes their client to refine the business
process and makes its business more efficient. The company has different process solution in the manufacturing sector like service opportunity management, customer experience
management, connected shop floor etc. These process solutions are more clients. The
company also help manufacturing companies to manage and improve supply chain agility to sustain in the global competitive market. Zensar's business benefit driven framework coupled
with its deep domain expertise, service offerings, business & edge solutions, and strong IT
capabilities helps customers in addressing specific requirements, gaps and challenges and
enable them to achieve targeted business performance while keeping total cost of ownership at optimum level. Zensar’s business benefit driven service and solution.
Distribution strategy and value chain dynamics are becoming integrated with existing
capabilities to drive business growth. By enabling the most trustworthy, efficient, and effective processes, company help retailers achieve higher service levels while reducing costs,
thereby growing customer loyalty and brand strength.
Industry Focused Solutions
Manufacturing
• Service Opportunity
Management
• Customer Experience
Management
• Connected Shop Floor
Retail
• Omni-Channel Consumer
Experience
• Omni-Present
Commerce
• Flexible Supply Chain
Insurance
• Social Listening
• Reinsurance
• Predictive Analytics
• Modernization
Banking
• Omni-channel Banking
and Analytics
• Lending and Payments
• Online Banking and
Mobile Banking
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 8
Strong business strategy to attain the top line
Zensar has strong domain focus among the sectors like manufacturing, retail and insurance
sector. The company has larger revenue coming from these sectors. This niche segmentation
of the revenue makes zensar a different IT service company than other traditional IT companies. Zensar has also a strategy to focus on three different areas of business viz. Digital
Enterprise, Infrastructure management and Application management.
3X3X3 Focus
Source: Company data, Institutional Research
More than 70% of its revenue coming from manufacturing industry. Strong process driven
solutions and unique tools make company more efficient in its business. Majority of large cap
IT services companies in India have banking and NBFC’s as a majority of revenue contributors. This also can create a Zensar a great business opportunity and will make Zensar a strong
player in longer run. Retail and Insurance sector are also among top revenue generating
sectors for the the company. This unique business strategy makes company more robust in
terms of business structure.
North America remains the major revenue contributor to the top line even in the case of
Zensar. More than 75% of the revenue coming from the same region, Europe contributes around 10% and Africa contributes around 8%. The company has more dependence on the
American region which also provides a advantage to grow with the higher momentum.
Slowdown in the European region will not affect significantly on the top line of the company
as lesser dependence on the region.
Majority of the revenue coming from the application maintenance and services (AMS). Around
70% of the revenue comes from the services. These are services consider to be low realization services. However now company is now focusing on high realization service offerings like
digital services. Long term contracts gives the guarantee to the revenue over longer run
horizon makes Zensar more sustainable in the adverse conditions or economic slowdown.
Industry Manufacturing
Geographical Segment
Service Offering
USA
ApplicationManagement
Retail
Europe
Insurance
Africa
Infrastructure Management
DigitalEnterprise
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 9
Consistent employee addition help company to maintain higher efficiency
Strong employee support makes IT service company stronger. Higher the employees higher the projects can IT company can take. Employee addition increases the efficiency of the company.
This will ultimately help to attain higher top line growth and also help company to grow.
As shown in the above chart, Zensar has consistent employee addition which ensures timely
completion of the project. Higher efficiency ensures lower operating cost which will help Zensar to produce better operating margins. Moderate addition in the employees also helps to
add active clients. This will also help to attain desire top line growth. From the above chart
we can see that, Zensar has stable utilization levels also show the efficient use of its
manpower to generate revenue. This enables company to acquire new projects easily as compared to its peers, and also ensures the timeline based delivery of the project.
Employee Addition
Source: Company data, Institutional Research
As we can see from the above chart that consistent employee addition makes company more efficient in terms of the new contracts to be taken. Currently company has around 8050
employees and have utilization rate of 79% .This consider being higher as compared to its peers. Higher utilization rate signifies higher pretax margins and greater operational
efficiency. We believe that continuous employee addition with sustainable utilization rate
makes company more robust. Lower attrition rate will also help to improve the efficiency of
the human resource and makes a operational functions more smooth.
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Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 10
Financial Overview Pretax Margin
EBITDA Margins As shown in the graph below, Zensar has shown consistent EBITDA growth over the past few
quarters. This shows that Zensar has been successful in managing the operating expenses
efficiently with the rise in the top line. After the slight decline in the EBITDA margins in
4QFY14 company has started regaining the desire operating efficiency over last two quarters and will also likely to continue in the upcoming period.
EBITDA Margins
Source: Company data, Institutional Research
Operating Margins As shown in the graph below, Zensar has become successful in increasing the operating margins over past few years. Consistent rise in the operating profit indicates that, Zensar has
become successful in transferring the operating cost to its customers. This also indicates rising
efficiency in the business. We believe that Zensar will deliver better operating margins as they focus more on the segments where they have higher realizations.
Operating Margins
Source: Company data, Institutional Research
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EBIT Margin
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 11
Net Profit Margin
Zensar has become successful in delivering consistent and high growth in the net profit and also margins are showing consistent growth. This shows that the business of the company has
become more robust over the period of time. Large multiyear contracts, strong client addition
makes company more lucrative. We believe that Zensar will likely to report higher bottom line
growth in the upcoming future. This also makes Zensar a safer bet.
NPAT Margin
Source: Company data, Institutional Research
Return Margin
ROE performance
As shown in the diagram below, we can see that ROE of the company has increasing consistently over last four years. This shows that Zensar has produced better results on the
invested equity. This also shows that, Zensar is a better investment opportunity and can produce better return in the future.
RoE
Source: Company data, Institutional Research
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Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 12
Return on the capital Employed (ROCE)
Return on the capital employed (ROCE) is also one of the major important aspect while investing. Zensar has zero or marginal debt on their balances sheet. So that the company has produce the strong growth in terms of ROCE as net profit is growing. We believe that Zensar
will show a strong growth for the upcoming period.
RoCE
Source: Company data, Institutional Research
Payout Ratio
Dividend Payout Ratio
Zensar is one of the highly dividend paying company. As shown in the graph below Zensar has strong payout ratio. This also makes stock very lucrative. We believe that in the upcoming
period Zensar will likely to maintain the payout ratio of 20% in the upcoming period.
Dividend Payout Ratio
Source: Company data, Institutional Research
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Dividend Dividend payout
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 13
Net Profit to Payout Ratio
Zensar has history of paying dividend to its share holder. As shown in the diagram below we can see that company had given dividends as proportion to the net profit. We believe that
payout ratio to net profit ratio will likely to remain same. This also makes stock more lucrative. Investor can also take privilege of higher payout ratio.
Net Profit to Payout Ratio
Source: Company data, Institutional Research
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Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 14
Key Risks
Investment Risk :
Fluctuations in the US$-INR and GBP-INR and GBP-US$. As majority of the revenue comes
from international territories. Fluctuation in the currencies will impact the revenue of the company
Change in the economic climate / legislation against Indian offshore development in the countries where the company provides its services. Fluctuation in world’s largest economy
will affect the IT services business on substantial front.
Increase in Visa fees will increase the cost. Rise in the visa fees will lead to rise in the operating cost (Employee expenses) to IT industry. So it plays a major role in the IT
industry.
Salary hikes i.e. wage inflation may cause a spoil sport. Rising economic growth will create more jobs in the country. This will ultimately give rise to wages hikes. Wage hikes
will affect the operating margins of the company. So fluctuation in the wages is considered to be significant risk in IT service Industry.
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 15
SWOT Analysis
Source: Institutional Research
Strengths• Strong domain focus
• Diversification of business.
• North America is the main area
of operations
• Strong management and
Employee workforce
Opportunities• Further penetration in US
• Mining the existing and the new
clients
Weaknesses• High client concentration
• High geography concentration
• Single domain dependence
Threats• Slowdown in the European
economy
• Slowdown in the IT spending
• Loss of top client
• INR appreciates vis-a-vis
Zensar Technologies
Ltd.
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 16
Michael Porter’s Five Force Analysis
Source: Institutional Research
Inter-firm Rivalry–High
Lower Entry barriers in the industry have led to high concentration in
the industry.
Threat of new entrants –
Increasing
• MNCs are entering the ‘offshore’
business heavily.
Bargaining Power of Suppliers – High• Intense competition in the
recruitment market puts higher
wage pressure and increasing
trend of attrition is witnessed.
Bargaining Power of Buyers –
Increasing
• With availability of multiple
vendors, Buyers have a lot of
choice and this has led to
pressures on the billing rates.
Threat from Substitutes -Increasing• Emerging economies like China,
Brazil and Russia can be the
substitute places for ‘offshoring’
taking away the India advantage
to certain extent.
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 17
Valuation & Outlook
At the CMP of `960, Zensar is trading at 14.9x, and 14.1x its FY16E, and FY17E EPS of `65.7
and `69.4. Compared to its peers; Zensar is trading at a discount P/E multiple, although its
margins are better than or comparable to peers. We initiate coverage on Zensar technologies
Ltd with a BUY rating and attach a multiple of 16.8 xs to Zensars’ FY17E earnings (EPS) to
arrive at the target price of `1,166, indicating a potential upside of 21%.
1 year forward P/E Chart
Source: Capitaline, Institutional Research
1 year forward P/ BV Chart
Source: Capitaline, Institutional Research
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Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 18
Income Statement
Y/E Mar (`mn) FY13 FY14 FY15E FY16E FY17E
Net revenues 21,145 23,155 26,276 29,115 33,177
Other Oper. Income 140 194 281 246 294
Total Oper. income 21,285 23,349 26,557 29,361 33,471
Employee Cost 11,778 13,003 16,252 18,449 21,071
EBITDA 2,952 3,580 3,917 4,446 4,778
EBITDA Margin (%) 14% 15% 15% 15% 14%
Depreciation 331 378 415 451 480
Other Income 86 304 268 434 400
Interest (Net) 100 103 112 107 100
PBT 2,607 3,403 3,658 4,322 4,598
PBT Margin (%) 12% 15% 14% 15% 14%
Tax 861 1028 1,012 1,359 1,471
Adjusted PAT 1,746 2,375 2,646 2,963 3,126
Extraordinary Items 0 0 0 2 0
Reported PAT 1,746 2,375 2,646 2,961 3,126
Balance Sheet
Y/E Mar (`mn) FY13 FY14 FY15E FY16E FY17E
Equity capital 436 438 443 443 443
Reserves & Surplus 6853 9017 11127 13773 15233
Net worth 7,289 9,455 11,570 14,216 15,677
Total debt 1701 1099 424 405 360
Total Liabilities & Equity 12,572 14,859 17,345 20,421 22,037
Tangible Assets 978 890 872 1,200 1,320
Total fixed assets 3,993 4,236 5,488 6,016 6,341
Investments 8 7 8 10 15
Goodwill 2,990 3,326 4,601 4,800 5,000
Other Fixed Assets 294 297 467 750 800
Total Non-Current Assets 8,263 8,755 11,436 12,776 13,476
Debtors 3,354 3,581 4,539 5,500 6,000
Cash & bank 1,420 1,458 1,972 2,395 2,181
Loans & advances 856 817 867 1,000 1,000
Other Current Assets 937 1,392 1,704 2,000 2,500
Total Current Assets 8,035 10,015 11,240 13,495 14,681
Creditors 3,267 3,825 4,702 5,400 5,600
Provisions 315 468 637 400 400
Current Liab. & Prov. 3,582 4,294 5,339 5,800 6,000
Total Assets 12,572 14,859 17,345 20,421 22,037
Key Ratio
Y/E Mar (`mn) FY13 FY14 FY15E FY16E FY17E
Per Share Ratios
Fully diluted E P S 41.34 52.93 58.99 65.68 69.36
Book Value 172.57 210.73 257.95 315.37 347.77
Dividend per share 2.51 4.49 5.01 6.44 7.92
Valuation Ratio
P/E 14.61 17.45 15.86 14.61 13.83
P/BV 1.44 1.45 2.25 3.26 2.76
EV/EBITDA 10.88 10.16 9.57 7.53 6.68
EV/Sales 0.82 0.78 1.33 1.94 1.59
Growth Ratios
Sales Growth 31% 21% 18% 22% 16%
EBITDA Growth 50% 27% 20% 8% 37%
Net Profit Growth 15% 43% 15% 36% 23%
EPS Growth 16% 43% 15% 36% 23%
Common size Ratios
EBITDA Margin 14% 15% 15% 15% 14%
EBIT margin 13% 15% 14% 15% 14%
PAT margin 8% 10% 10% 10% 9%
Employee cost 56% 56% 62% 63% 64%
Return ratios
RoNW 24% 25% 23% 21% 20%
RoCE 30% 33% 31% 30% 29%
Solvency Ratios
Total Debt/Equity 23% 12% 4% 3% 2%
Source: Company data, Institutional Research
Cash Flow
Y/E Mar (`mn) FY13 FY14 FY15E FY16E FY17E
PBT 2,606 3,399 3,659 4,322 4,598
Add: Depreciation 331.6 383 415 451 480
Other Adjustments (61) (94) (354) (102) (115)
Chg. in working capital 1,810 3,146 4,194 (769) (868)
Taxes paid (861) (1,028) (1,012) (1,359) (1,471)
Extra Ordinary Items - - - - -
CF from operations 949 2,333 918 1,391 1,417
Change in fixed assets (336) (332) (338) (380) (350)
Purchase of investment (336) (332) (338) (380) (350)
Proceeds from Invest. Sale 2,813 2,695 5,797 100 (150)
Other Adjustments 35 84 66 38 38
CF from Investing acti. (247) (1,284) (1,820) (660) (850)
Chg. in debt (652) (516) (754) 204 150
Chg. in Equity capital (163) - (229) - -
Chg. in Pref. capital - - - - -
Dividend & dividend tax (379) (411) (542) (500) (300)
CF from Financing acti. (231) (282) (813) (296) (150)
Chg. in cash (326) 36 512 435 417
Opening cash 834 1,506 1,651 1,960 2,395
Closing cash 1,420 1,458 1,972 2,395 2,181
Du-Pont Analysis (%) FY12 FY13 FY14 FY15E FY16E
PAT/ PBT 67% 70% 72% 69% 68%
PBT/ PBIT 96% 97% 97% 98% 98%
PBIT / Sales 13% 15% 14% 15% 14%
Sales / Assets 235% 219% 219% 199% 207%
Assets/ Equity 123% 112% 104% 103% 102%
ROE 24% 25% 23% 21% 20%
Equity | India | IT Services
Zensar Technologies Ltd. October30 ,2015
Institutional Research | Initiating Coverage 19
NOTES
Recommendation Rationale
Recommendation Expected Absolute Return (%) over 12 months
BUY >15%
ACCUMULATE <10% and >15%
NEUTRAL <-10% and <10%
REDUCE >-10% and <-20%
SELL >-10
Expected absolute returns are based on share price at market close unless otherwise stated. Stock recommendations are based on absolute upside (downside) and have a 12-month
horizon. Our target price represents the fair value of the stock based upon the analyst’s discretion. We note that future price fluctuations could lead to a temporary mismatch between upside/downside for stock and our recommendation.
GEPL CAPITAL Pvt Ltd
Reg Office: D-21 Dhanraj mahal, CSM Marg, Colaba, Mumbai 400001
Analyst Certification
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or
indirect compensation in exchange for expressing specific recommendations or views in this report:
Name : Omkar Tanksale
Sector : IT Services
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