Axis Securities has upgraded Zensar Technologies to a BUY rating with a target price of Rs 605, citing strong Q2FY27 performance and AI-led growth. The company reported a 11.5% YoY revenue growth, with its BFSI vertical showing significant momentum. While management navigates upcoming wage hikes, the shift toward faster, AI-driven projects supports a positive outlook for shareholders.
Zensar Technologies Upgraded to BUY Following Strong Q2 Results
Net Sales reached Rs 1,585 Cr, while Net Profit stood at Rs 190 Cr for the quarter.
Reader Takeaway: Strong AI-driven order intake and BFSI growth offset margin concerns from upcoming wage hikes.
What just happened
Axis Securities has upgraded Zensar Technologies to a BUY rating, setting a target price of Rs 605. The move follows a quarterly performance showing 11.5% year-on-year revenue growth. The company reported a constant currency growth of 4.1% quarter-on-quarter, largely driven by a 7.1% jump in the BFSI vertical.
Why this matters
The company is successfully pivoting toward smaller, AI-led engagements. AI-influenced deals now make up 36% of total order intake. Management reported that over 80% of proof-of-value projects have transitioned into production, signaling higher conversion efficiency compared to traditional outsourcing models.
Management Commentary
Leadership has maintained its mid-teen operating margin guidance. To counter an expected 150-200 bps margin pressure from upcoming annual wage hikes in Q3 and Q4, management plans to focus on operational efficiencies and higher utilization. The company increased its headcount by 978 during the quarter to support project delivery.
Risks to watch
Global recessionary fears remain a primary risk to long-term demand. Additionally, investors should monitor the impact of rising subcontracting costs and cross-currency fluctuations, which could squeeze margins if efficiency levers fail to fully offset the upcoming wage hikes.
Context metrics
The company recorded an EBIT margin of 13.4%, an improvement of 67bps sequentially, though slightly lower than the previous year. The stock is currently trading at approximately Rs 537, with the new target implying an upside of 13% based on FY28 earnings projections.
What to track next
Watch for the successful implementation of wage hikes in the next two quarters and whether the 'ZenseAI' platform continues to act as a meaningful delivery accelerator for new contract wins.