Midcap IT Stock To Buy For The Potential Upside Of 15%: Motilal Oswal

Motilal Oswal, a leading brokerage firm, has given a buy call for the stock from the IT sector. The brokerage firm is highly bullish on Zensar Technologies Ltd and has given the stock a target price of Rs. 265.

The price of Zensar Technologies has been falling sharply over the past few months, and the stock is still in a downtrend over a larger time frame; however, the latest report of Motilal Oswal says the stock can go upside for 15% from the current market price.

Here is a detailed breakdown of the latest report of Motilal Oswal on Zensar Technologies Ltd.

Outlook of Zensar Technologies Ltd. (ZENT)

Zensar Technologies Ltd provides technological services and digital solutions. Its headquarters are in Pune, India, and it belongs to the RPG group, which has offices in Mumbai. Application Management Service and Infrastructure Management Service are its two operating segments. It concentrates on industry verticals such as high-tech manufacturing, consumer services, banking, and insurance.

The stock's current market price is Rs. 228 with a market capitalization of Rs. 5, 155 Crores. The stock's all-time high is Rs. 587, and the all-time low is Rs. 222. The stock is trading very near its all-time low currently.

Buy Call Of Motilal Oswal On Zensar Technologies

'We expect a continuation in the revenue growth momentum in FY23. The new CEO-led leadership team is in place, and its growth strategy has delivered results. The management expects the margin to revert to the high teens over the medium term. With strong organic growth in FY23 and a recovery in key accounts, we see the potential for a significant stock re-rating as valuations catch up with its peer group. Our target price implies 14x FY24E EPS. We maintain our Buy rating on the stock.', says Motilal Oswal in the latest report.

Key Reasons for the downfall of Zensar Technologies Ltd

Here are some of the reasons mentioned in the report of Motilal Oswal,

• 'The management is seeing signs of a softening in demand from clients.
• As the business at large retailers is shifting towards cost-efficiency work, ZENT aims to be selective in its approach to avoid aggressive pricing behaviour.
• There is a visible slowdown in Retail, Manufacturing, and Technology. Tech companies have started to lay off employees.'

Key Reasons for the growth of Zensar Technologies

According to the report of Motilal Oswal,

• 'In terms of geographies, Africa remains strong, although depreciation in the currency has acted as a drag for ZENT.
• It also has a good M&A pipeline, with five deals.
• ZENT offered its best-ever wage hike in Jul '22, helping cool attrition. It aims to pare down attrition to 22% over the next two-to-three quarters.
• It hired 1,600 freshers in FY22. Due to the training period, higher sub-contractor costs and an increase in its bench strength acted as a drag on margin.'