Zensar Technologies - Margin Expansion In FY24; Revenue Growth Focus For FY25: Systematix

Systematix Research Report

We met the management of Zensar Technologies Ltd. as a part of RPG group investor day. The company’s Ebitda margin improved in FY24 by more than 600 bps to 17.8% as the company-

1. reduced its subcon costs,

2. lowered backfilling employee costs as attrition moderated, and

3. cut tail accounts with lower profitability.

However, FY24 revenue growth was muted. For FY25, the company expects revenue growth to revive as;-

1. it is targeting large deals ($25 million +) in each vertical and each geography during this period,

2. it expects to focus on the Gaming sub-vertical for growth (which comes under Hi-Tech vertical), and

3. is looking for an acquisition in healthcare vertical.

The company witnessed sequential growth in all four verticals in Q4 FY24 after several quarters and expects this momentum to sustain in FY25. Management indicated it is not looking to add any more verticals at this stage, as existing verticals present enough organic and inorganic opportunities.

Management sees Generative AI as a technology to be used more as an automation tool due to lack of any earth-shattering use cases so far. We do not have a rating on the stock, which currently trades at 23.4 times 1-year forward PE multiple.

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