Buy Persistent Systems; target of Rs 5,220: Sharekhan

Sharekhan's research report on Persistent Systems

Persistent Systems Ltd (PSL) reported $328 million in revenues, up 5.6% q-o-q in constant currency (CC) terms, beating our estimates of $326 million. Growth was led by Healthcare & Lifesciences and BFSI partially offset by weakness in Software, Hi-tech & Emerging Industries. EBIT margin contracted ~ 40 bps q-o-q to 14% hit by one-time visa costs, increase in subcontractor cos and higher SG&A, but beat our estimates of 13.7%. Adjusted Net profit was down 2.8% q-o-q / up 10.5 % y-o-y to Rs. 306 crore, beating our estimates by 1.8%. Order booking was robust with total TCVs at $462.8 million, up 3% q-o-q/ up 22%y-o-y. Book-to-bill stood at 1.4x. New business TCVs stood at $310.8 million up 3% q-o-q/31% y-o-y. Revenues from top-5 clients, top10 clients, top-20 clients, and top-50 clients grew 11%/ 9.5%/7.2%, and 6.3% q-o-q, respectively.

Outlook

PSL has reported a strong quarter on revenue front and is expected to deliver healthy revenue growth for FY25. PSL has been consistently delivering industry-leading performance since the past several quarters and is well placed to lead the growth trajectory in FY25-26E, given the strong order book, consistent addition of new logos, and robust capabilities. We expect Sales/PAT CAGR at 17.1%/25.1% over FY24-FY26E We maintain BUY on the stock with a revised target price (TP) of Rs. 5,220 (valuing at 45x FY26E EPS). At CMP, the stock trades at 51.8/39.5x its FY25/FY26E EPS.