MOSL: ZENSAR TECHNOLOGIES (Buy)-Active Digital-oriented transformation-Synchronizing demand, offerings, delivery

​Zensar Technologies: Active Digital-oriented transformation; Synchronizing demand, offerings, delivery and sales

(ZENT IN, Mkt Cap USD0.6b, CMP INR869, TP INR1020, 17% Upside, Buy)

We attended the RPG Group analyst meet. Key highlights of the meeting with Zensar Technologies (ZENT):

• Duality in the business…: 80% of the incremental dollars are being spent on Digital by enterprises. While this offers a large opportunity, some headwinds have been looming over the industry. The decline in the traditional and legacy business has been steep as customers aim to fund their digital initiatives via savings in commoditized services.
  
• …evident from performance metrics: Over the last three years, Digital recorded a 59% CAGR, constituting 29.8% of revenue in FY17, while Legacy business declined at a 7.3% CAGR. ZENT expects overall growth to start gaining momentum once volumes pick-up in Digital is enough to offset pressure on traditional business. Digital contribution is expected to increase to 35% of total revenue over next four quarters.
  
• Building products and platforms…: As Digital gains more relevance, service providers will have to increasingly build capabilities or buy them. ZENT has built multiple solutions: [1] The Vinci – a cloud orchestration and managed services platform, [2] ZenAnalytica – predictive analytics, [3] SmartBlox – blockchain feasibility assessment, [4] RPA – using bots to automate processes and [5] Digital Workplace Services.