1612🚀Long term level hit

Zensar Technologies company details report

NEWLEADERSHIPDELIVERYEVIDENTFROMIMPROVEDFINANCIALS

Zensar isanewturnaroundstoryunfoldingatRPGgroupledby its newleadershipteam.Thisisevidentfromstrategicchangesundertakenlike: ✓CEOManishTandonleadingZensar’sstorytobringinstabilityandagility ✓ Largedealwinsfueledbyincentivizingsalesteamstructure ✓Clientcentricityreflectedinimprovedcustomerexperiencescores Thenewinitiativesaregetting reflectedoncompany’s industry lowest attrition rates, better customerexperiencescoresand improvingprofitability,whichhas witnessed40%CAGRfromFY23-25.

FOCUSEDSERVICESASONEVALUEPROPOSITIONDIFFERENTIATES

Zensar’s focused services clubbed together as one value proposition has witnessedgrowthof8.2%YoYv/soverallTop-linegrowthof5.4%YoYinFY25. Theseservicesare resonatingwellwith largeclientsmeeting their customized needsatonego.Thisvaluepropositionisalsoleadingnon-TMTverticalstodrive double-digit growth for thecompany, further aidedbybroad-basedgeography growthstrategywithexpectedrecoveryinSouthAfricanmarket.

Zensar is putting in extra effort and focus on executing large deal closures, which it expects to be better in FY26 versus FY25. Though, the probability of RFP led large deals coming in market has stayed muted for quite some time, however, Zensar is proactively creating large deals and there the deal pipeline for Zensar remains good. This is led by the: ✓ New incentive structure- Zensar has announced new incentive structure for sales team by giving them over 100% performance-based bonus to drive large client accounts by doing more of up-selling and cross selling. New leadership designs new incentive structure to drive large deal growth Reduction in Top client dependence offset with net new wins thereby derisking model for sustainable long-term growth ✓ Newplatform for sales function– Internally, the company has established a new platform, comprising strategic alliances, pre-sales and inside sales operations. This has enabled the company to recently win a large deal from UK based Tesco Insurance. ✓ Higher net new wins– The new incentive structure is enabling higher proportion of net new wins for Zensar, which stands in range of 60-65%. This is despite of the concerning global economic outlook. Thus, we believe the company’s focus on large client accounts is reflecting in revenue growth of Top 20 clients account, while that of Top 5 & Top 10 client contributions is gradually coming off with more additions of net new wins thereby de-risking the model aiming for more sustainable growth in long-term. Reducing dependen

LEADINGTCVCONVERSION,STRONGCASH,POISESZENSARFORLEAP

StableTCVwinswith impressive industry leading revenueconversion rateof 90%buildsconfidenceonfutureexecutional capabilitiesofZensar.Moreover, it haswitnessed35%CAGRincashequivalentsfromFY19-25,withzerodebton books&Mcap/OCFratioof30x,whichretains investmentcomfort.Webelieve, Zensar’sstrong liquiditypositioncompels for strategicbuyouts/ investmentson largedeals,whichwouldhelpaccelerateitsgrowth&profitabilityinfuture.

ZENSAR’SAIPLAYBOOKTODRIVEINTELLIGENTOUTCOMES

Ledby technology innovationatheart,Zensaraims torideontheAIplaybook, whichiscurrentlywitnessinggoodclientconversationsacrossITIndustry.44%of Zensar’sdeal pipeline is ledbyAIclientconversations.Enterprisesgloballyare looking for strong vertical led value propositions to invest on, whichwould acceleratetheirgrowthandprofitabilityfor long-term.Hence,Zensar isfocussing onR&DinitiativesthroughZenLabstocomeoutwithlowcost,better technology offeringsthatwouldaddgreatvaluetoclient’sbusinessoutcomes.

Peer Comparison data

Financial performance

Zensar Technologies 500-615
Expected level 780
Support 410

Good morning

Colpal company details

Colgate-Palmolive (India) Ltd., incorporated in the year 1937, is engaged in the business of personal care and oral care products. It is India’s leading provider of scientifically proven oral care products at various price points. Colgate-Palmolive USA is the ultimate holding company and has 51% stake in Colgate-Palmolive India. Its oral care range includes toothpaste, toothpowder, mouthwash, mouth spray, toothbrushes, and dental gel under the ‘Colgate’ brand. While its personal care products include a range of shower gels, shampoos, liquid hand washes, and hand sanitizer under the 'Palmolive' brand. It has a strong distribution network in the traditional trade channels, and its e-commerce and modern trade channels are also gaining significant market share. The companyhas four manufacturing plants in Baddi (HimachalPradesh),Goa, Sanand(Gujarat) and Sri City (AndhraPradesh).

Presently, the company spends ~13% of its revenues on advertising. It was an official partner of various IPL teams in IPL 2020 seasonIn FY23, the company's Colgate Strong Teeth campaign was endorsed by two of the
biggest celebrities - Shahid Kapoor
and Rana Daggubati. The MaxFresh Charcoal toothpaste is endorsed by Ranveer Singh.

#EBITDA #MARGIN

In FY24, EBITDA margin was 33.46%, expansion of 386 bps YoY. In Q1 FY25, EBITDA margin was 33.96%, expansion of 237 bps YoY. EBITDA margin was aided by improvement in gross margin (expanded by 222 bps YoY), increase in product prices coupled with deflation in its key raw materials. This was achieved despite an increase in advertising spends (up by 10% YoY) required to support the launches/re-launches of products of its core brands, with an aim to potentially enhance its market share. Other expenses grew by 13% YoY. In FY25, the margins may not see any major improvement from the current levels. As the pricing growth is expected to be lower, rather the company will be focusing on volumes and premiumization led growth.

#SALES #GROWTH 5 YearCAGR: 4.9%

In FY24, net sales was ₹5,680 cr, up by 9% YoY, primarily driven by strategic pricing actions. In Q1 FY25, net sales was ₹1,497 cr, up by 13% YoY. Domestic net sales grew by 12.8% YoY. Growth was driven by revival in rural demand and steady performance in toothpaste category (reported double digit growth). The rural market demand outpaced growth in the urban markets for the second consecutive quarter. This continues to bode well for the company as it derives ~40% of its revenue from the rural markets. Going forward, the topline growth will be driven by a combination of volume, strategic pricing action and product mix(increased emphasis science based premium products). It is also focusing on strengthening its core brands (Colgate Strong Teeth, Colgate MaxFresh & Colgate Active Salt) along with science-led product innovation.

#EBITDA #GROWTH 5 YearCAGR 9.0%

In FY24, EBITDA was ₹1,901 cr, growth of 23% YoY. In Q1 FY25, EBITDA was ₹508 cr, growth of 22% YoY. EBITDA growth was aided by higher revenue growth, pricing actions and benign raw material costs.

#PAT #GROWTH 5 YearCAGR 11.3%

In FY24, PAT was ₹1,324 cr, growth of 26% YoY. Adjusted PAT grew by 27% YoY. In FY24, exceptional loss incurred stood at ₹20 cr ( for FY23: ₹11 cr). Exceptional loss pertains to severance and related expenses with respect to certain organisation structure changes. In Q1 FY25, PAT was ₹364 cr, up by 33% YoY. Adjusted PAT growth for the period was 24% YoY (for Q1 FY24 it incurred exceptional loss of ₹20 cr). Going forward, profitability is likely to be supported by a strong brand recall and sustained leadership in its core portfolio (Colgate Strong Teeth, Colgate MaxFresh and Colgate Active Salt), premuimisation coupled with product innovation and renovation. It is also looking to grow its oral care adjuncts like floss and mouthwash, and and leveraging its Palmolive brand. However, this can be partially impacted by slow category growth coupled with high competitive intensity in oral care segment.

#PAT #MARGIN

In FY24, PAT margin was 23.30%, expansion of 326 bps YoY. Adjusted PAT margin was 23.65%, expansion of 339 bps YoY. In Q1 FY25, PAT margin was 24.32%, expansion of 364 bps YoY. Adjusted PAT margin expanded by 216 bps YoY.

#COMPANY #POTENTIAL

The toothpaste category in India is valued at ~₹18,000 cr, and comprises 70% of the total oral care segment. The per capita use of toothpaste remains low in India and this represents opportunity for category growth. • In Q2 CY24, the FMCG industry reported value growth of 4% YoY. Volume growth was 3.8% YoY v/s 6.5% in the March quarter. • The rural volume growth in the quarter stood at 5.2% while urban was at 2.8%. In Q1 CY24, rural volume growth stood at 7.6% and urban was at 5.7%. • Price growth stabilized at 0.2%, indicating stable market environment. • The non-foods, volume growth stood at 7.6% in the quarter ended June compared to 11.1% in the quarter ended March. • During the quarter, the decline in consumer demand for Personal Care & Home Care categories was seen in both urban and rural markets. • In urban markets, Personal Care categories witnessed volume growth of 5.2% in Q2 CY24 (v/s 9.7% in Q1 CY24), while in rural it was 8.3% in Q2 CY24 (v/s 10.6% in Q1 CY24). • Going forward, channel mix will shift dramatically in favour of e-commerce. The growth in e-commerce channel have aided the sector to drive strong growth in the urban sector. FMCG companies are focusing on digitisation for enabling smooth functioning of its supply and distribution channel. • The premium segment continues to perform well than the mass segment. The volume growth of premium products is significantly ahead of mass products in the market. • Government’s PLI (Production-linked incentive) scheme, with an outlay of ₹10,900 cr, is likely to give companies a major opportunity to boost exports.

#MANAGEMENT #OUTLOOK

Thecompany is focusing on four pillars of growth: (i) lead the toothpaste category by growing the volume and the core category; (ii) driving premiumisation & innovation; (iii) drive category growth in toothbrushes & devices (iv) scaling the Palmolive brand to drive the personal care category, however, the near term focus will be its core category which is the bodywash. • The toothpaste and toothbrush categories remains underpenetrated, which provides immense headroom for growth. • Itsstrategy remains to drive premiumizationin both the toothpaste and toothbrush category with focus on innovation, strengthening leading position in the toothbrush segment, and diversification in personal care through the Palmolive brand. • Going forward, it intends to double its oral beauty category by establishing beauty relevance and continuous focus on device led innovation. • Thecompanybenefits from its large ‘essential’ product portfolio and presence across the price-benefit pyramid. Thus, helping it to capture anyimpactof downtrading. • It is looking to introduce products from its global portfolio, mainly in the skin cleansing segment, to the Indian market. • The increased competitive intensity and slow category growth are the key challenges that management needs to tackle for a meaningfulrecovery.

Colpal 1900-2150
Expected level 2700
Support 1750

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