Stock to Buy: IT stock with 52% upside potential by Motilal Oswal

Synopsis: Zensar Technologies shares are in focus after Motilal Oswal believes that the company still has significant potential to rally 52% upside from current levels, citing improved margins, significant deal wins worth $180 million and more, supporting the brokerage’s rationale. 

The shares of this small-cap IT company, engaged in assisting global enterprises in enhancing business performance and customer experience through technology, are in focus after Motilal Oswal projects a staggering 52 percent upside from its current price. In this article, we will try to understand the rationale behind this uptick.

With a market capitalisation of Rs 15,263 crore, the shares of Zensar Technologies Ltd are currently trading at Rs 659.90 per share, down 1 percent from its previous day’s closing price of Rs 667.35 per share. Over the past five years, the stock has delivered a robust 183 percent, outperforming NIFTY 50’s return of 66 percent.

Analyst Comments

Leading domestic brokerage house, Motilal Oswal, has assigned a Buy call on the stock and has fixed a target price of Rs 1,000 per share, signalling a massive upside potential of 52 percent from its current market price.

Motilal Oswal is optimistic because the company’s profit margins improved significantly even though revenue dropped a bit. In Q3, revenue slipped by 1.3 percent QoQ, but the EBIT margin rose to 16 percent, an increase of 240 basis points in just one quarter, mainly driven by a higher offshore mix, which improved by about 400 basis points YoY. 

This shift means more work is being done in lower-cost locations. Management has projected mid-teens margins, and the brokerage expects margins to be around 16 percent in FY27, indicating strong earnings support.

The second significant factor is the robust deal wins by the company as it reported USD 180 million (~Rs 1,650 crore) in new order bookings, a 13.6 percent increase QoQ, with a book-to-bill ratio of 1.12x. This indicates it is winning more business than it is currently delivering, which enhances future revenue visibility. Approximately 20 percent of the order pipeline is AI-related, showing it is benefiting from the trend toward automation and cost-saving technology.

Even though some segments are underperforming, overall business trends are positive. Volumes grew, with offshore volumes increasing by 3.1 percent QoQ and total volumes rising by 1.7 percent. The brokerage anticipates revenue will grow again in Q4, with an expected 1.3 percent QoQ increase, aided by more working days and the execution of new deals.

Due to steady margin expansion and gradual revenue recovery, Motilal Oswal expects its revenue to grow by 7.9 percent, EBIT by 8 percent and its adjusted PAT likely to decline by 7.9 percent in the fourth quarter of FY26. 

Also, the brokerage expects EBITDA margins to remain strong at around 15.9 percent in FY26 and 16.2 percent in FY27, which should support a profit growth (PAT CAGR) of nearly 10 percent between FY26 and FY28. Based on this improving earnings outlook, the brokerage values the stock at 26 times its FY28 estimated earnings and has set a target price of Rs 1,000, implying a strong 52 per cent upside from current levels, which forms the basis of its strong BUY recommendation.

Zensar Technologies is an IT services and digital transformation company based in Pune. It assists global enterprises in enhancing business performance and customer experience through technology, led solutions. It has about 10,000 employees located in over 30 offices. It is serving more than 145 clients globally and provides various services like digital engineering, experience design, and enterprise modernisation, among others.

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