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- 23 Jan 2024
- ICICI Securities
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ZENSAR TECHNOLOGIES REPORTED WEAK Q3FY24
ZENSARTECH - 855 Change: 2.00 (0.23 %)News: Zensar Technologies reported weak Q3FY24 revenue numbers due higher than expected furloughs in Hitech vertical. The company reported revenue of US$ 144.7 mn, down 3.7% QoQ & 0.8% YoY while in CC terms it declined by -3.2% QoQ & 1.3% YoY. Vertical wise the decline was broad based with Hitech (25.9% of mix) declining by 7.7% QoQ while Manufacturing & Healthcare declining by 1.8% & 5.2% QoQ in CC terms respectively. Geography wise US region (66% of mix) declined by 3.6% QoQ in CC terms while Europe & Africa region declined by 2.6% & 0.5% QoQ respectively. The company’s EBITDA margin declined by 140 bps QoQ to 17.2% due to headwinds of furloughs -200 bps, currency impact -10 bps, higher SG&A exp. -70 bps mitigated by the tailwinds of higher utilization & lower discretionary spending +140 bps. The revenue from Top 5/top 10 & top 20 clients declined by 10.7%/7.3% & 5% QoQ respectively. The company’s order book during the quarter declined by 14% QoQ to US$ 167.5 mn. The company’s net employees during the quarter declined by 105 to 10,225 while attrition declined by 110 bps QoQ to 12%. The company declared interim dividend of Rs. 2 per share.
Views: The company’s performance was impacted by higher than usual furloughs especially in the Hitech segment which are expected to continue in Q4 also. The company’s performance in Q4 is also expected to be weak as there is no change in macro environment and discretionary spending by clients. We believe that the company is likely to finish FY24 on a weak note and even if reports a flat revenue growth in Q4 its revenue will decline in FY24 in dollar terms. The order booking is also weak indicating that near term outlook of revenue growth remains bleak. Revival in Hitech business is key for the revenue growth of company.
Impact: Negative