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Apr 24, 2012, 01.13 PM IST | Source: Moneycontrol.com

Buy Persistent Systems; target of Rs 444: Dolat Capital

Dolat Capital is bullish on Persistent Systems and has recommended buy rating on the stock with a target of Rs 444 in its April 23, 2012 research report.

Dolat Capital is bullish on Persistent Systems and has recommended buy rating on the stock with a target of Rs 444 in its April 23, 2012 research report.

“Post earnings call we maintain our positive stance on the company on account of inline numbers, incremental focus on non linear IP led revenues, sustained profitability outlook and attractive valuation (6.6x of FY14E Earnings).”

“Persistent Systems’ operating results for Q4FY12 were inline with expectations with a topline growth of 1.1% at Rs 2.7bn as against our estimate of Rs 2.7bn. Revenue growth was largely driven by IP led efforts - contributing 12% to revenues (up 38% QoQ) also includes Openwave numbers. Non IP revenues were up by just 1.5% QoQ all on better pricing of 1.7% as volumes remained flat for the quarter. The company has indicated better than industry growth (NASSCOM projects 11-14%) for FY13 alongwith margin maintenance at FY12 levels of 19.6% at PBT levels. The company has not given quantitative guidance and has earmarked a soft fresh hiring plan of 350 employees in FY13. It will review salary hikes post Q2FY13 and have indicated better reward than peers.”

“We believe that the company going forward would rely less on fresh hiring as it used to be till FY10. We expect 15% volume growth for the company in view of challenging demand in the discretionary (new development) budgets. It would also focus on non linear opportunities and improved efficiency; incrementally. It continues to remain focused on its next generation technologies and expect its sales strategy along with opportunities in ‘Bigdata’ to drive the revenue growth in the coming period. We remain positive on the stock for its attractive valuations of 6.6 (x) for FY14E EPS of Rs 49.4 with a BUY rating on the stock with a target of Rs 444 valued at 9x of its FY14E earnings,” says Dolat Capital research report.     

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