Deal wins for the quarter stood at $125 mn, down 24.5% QoQ and up 29.3% YoY, with a healthy mix of new wins and renewals. The hi-tech and manufacturing verticals are witnessing a slowdown. Consumer services sector is also seeing a cut in discretionary spends, highlighted brokerage and research firm ICICI Securities.
“Management is seeing pockets of softness in business and a few clients have hinted towards reduction in spend amid the macro-uncertainties," the note stated. The brokerage house has maintained the buy rating on Zensar Tech shares with a target price revision to ₹276 from ₹295.
Going forward, management expects a short-term impact from the ongoing macro-challenges and continued supply-side constraints. ICICI Securities expects margins to be under pressure given the supply-side issues, gradual return of travel and facility costs, and investments for growth.
Further, it expects weak supply side engine coupled with cut down/deferment of discretionary spends by clients in consumer services/ hi-tech/ manufacturing verticals due to challenging macro environment is likely to limit earnings growth ahead.
"Management noted that it faced high supply-side pressure, which impacted margins; revenue growth remains strong and delivered its highest USD revenue till date. It has pushed mid-teen margin target by a couple of quarters to Q2FY24E. We are cutting FY23E/FY24E EPS by 4.8%/1.3% to incorporate the earning miss," while retaining ‘Buy’ tag on the IT stock with an unchanged target price of ₹406.
Indian IT service provider Zensar Tech's shares are hovering near its 52-week low level. The IT stock has declined more than 57% in 2022 (YTD) so far.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
