Motilal Oswal Sees Upside Potential in Zensar Stocks

Motilal Oswal Maintains BUY Rating on Zensar Despite Revenue Decline

Zensar (ZENT) reported its fourth quarter fiscal year 2026 results, which showed a revenue decline of 1.9% quarter-on-quarter (QoQ) on a constant currency (CC) basis, slightly lower than the estimated decline of 1.8% CC. The company's business segments also reported varying growth rates, with the Banking, Financial Services, and Insurance (BFSI) segment growing 1.2% QoQ CC, and the Healthcare and Life Sciences/Media and Communications (HLS/MCS) segment declining 6.6% and 3.9% QoQ CC, respectively.

Deal TCV, or total contract value, for the quarter was USD 401.8 million, representing a 122.9% quarter-over-quarter increase and an 88% year-over-year decline. The book-to-bill ratio was 2.5x, indicating a strong pipeline of business. EBIT (Earnings Before Interest and Taxes) margins declined to 14.7%, a 130 basis point decrease from the previous quarter, and slightly above the estimated 13.8%. Adjusted profit after tax (PAT) was INR 2,102 million, down 4.1% from the previous quarter and 19.2% from the same quarter last year, but above the company's estimate of INR 1,602 million.

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Given these results, Motilal Oswal has revised its estimates for Zensar downward by 2.5% and 2.0% for fiscal year 2027 and 2028, respectively. The research firm estimates EBITDA margins of approximately 16.1% and 16.2% for fiscal year 2027 and 2028, respectively. Based on these estimates, Motilal Oswal's target price for Zensar is INR 640, which is based on 17 times fiscal year 2028 earnings per share (EPS). The research firm maintains its BUY rating on the stock.