Buy Persistent Systems; target of Rs 6800: Motilal Oswal

Motilal Oswal's research report on Persistent Systems

Persistent Systems (PSYS) reported 1QFY26 revenue of USD390m (vs. est. USD392m), up 3.9% QoQ in USD terms and 3.3% in CC (est. +4.0%). EBIT margin stood at 15.5% (est. 15.8%). EBIT grew 3.3% QoQ/31.1% YoY to INR5.1b. Adj. PAT came in at INR4.2b (est. INR4.2b), up 7.4% QoQ/38.7% YoY. For 1QFY26, revenue/EBIT/PAT grew 21.8%/34.8%/38.7% YoY in INR terms. We expect PSYS’s revenue/EBIT/PAT to grow 20.8%/35.3%/36.9% YoY in 2QFY26. TTM TCV was USD520.8m, up 1% QoQ and up 12% YoY (1.3x book-to-bill). We value PSYS at 48x FY27E EPS. Given its consistent execution and visibility on growth, we value PSYS at 48x FY27E EPS. Reiterate BUY with a TP of INR 6,800.

Outlook

We largely maintain our estimates for FY26E/FY27E. Owing to its superior earnings growth trajectory, on a PEG basis, we believe the valuation still has room for upside. We value PSYS at 48x FY27E EPS. Reiterate BUY with a TP of INR6,800.