Zensar Technologies Q1 Results Review - Revenue Growth Arrives Along With Early Hiccups: Nirmal Bang

Nirmal Bang Report

Zensar Trechnologies Ltd. posted mixed Q1 FY25 results with strong revenue beat, margin miss and decent total contract value deal wins (flat YoY). Revenue at $154 million was ~4% above our estimate on the back of broad-based growth across verticals and service lines.

Ebit margin missed our estimate due to higher operational cost and one-time provisioning of $1.75 million (on account of its $900,000 quarterly run-rate client filing for bankruptcy). This followed by wage hikes from July-24 onwards comes as an early hiccup to margin expansion.

As promised at the end of FY24, broad-based growth was delivered in Q1 FY25, which under the new CEO Manish Tandon is the sixth consecutive quarter of QoQ revenue growth, barring Q3 FY24.

Despite this, caution prevails around macro uncertainty amid heightened geopolitical threats which make the demand environment volatile. This is further accentuated by unusual furloughs seen by Zensar in the Hi-Tech vertical.

We continue to believe that the volatility revolves around the broad-based vertical growth across its business. Due to this furlough scenario, it is also not very clear if the worst on the Hi-Tech vertical side is over.

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