Prabhudas Lilladher's research report on Persistent Systems
Persistent reported inline revenue growth of 3.8% QoQ (Ple:3.2%) with strong performance from services business grew 5.3% QoQ to $114mn on 7.0% volume growth & IP-led revenue declined 3% QoQ to $22.1mn due to lower IP resale revenue. EBIT margin expanded by to 12.1% (Ple:10.9%) Gross margin expansion (+170 bps) was partially offset by higher SG&A (-70 bps). Management guided current EBIT margin (12%) as sustainable inspite of salary hike in Nov-2021. Management expects to maintain EBITDA margin in the range of 15-16% although it strives to improve it to 16-17% by various cost optimization levers. We expect stable margin performance in FY21/22/23E EBIT margin at 12%/12.1%/12%.
We continue to value Persistent on 20X Sep-22 earnings to arrive at changed TP of INR 1368 (earlier: 1304). Persistent is currently trading at 18.3x/16.6x on FY22/23 earnings of INR 65/72. Maintain Buy.
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