Dolat Capital Market's research report on Persistent Systems
Persistent reported stellar Q2 performance, with 3.9% QoQ growth at $136mn (DE 2.9%). OPM improved by 170bps QoQ to 12.1% (DE 10.6%) driven by sustained traction in TSU business (up 4.1% QoQ). Commentary turns further confident as the Newly instated CEO expect the turnaround in the Alliance business in FY22e both on growth as well as profitability, while expects momentum in the TSU business to continue to clock healthy growth led by robust deal-win momentum. Expect sustenance of Profitability despite impending wage hikes given potential for improvement in Alliance biz (offshore shift), efficiency in the volumes and normalization of ramp-down/discount impact.
Accounting for its strong performance, confident commentary (deal wins), improved business traction in Alliance and unutilized margin levers we have upgraded our estimates for FY21/22E by ~11%. We assign Accumulate rating on the stock with TP of Rs1300 valued at 19x FY23E earnings.
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