ICICI Direct's research report on Persistent Systems
Persistent System reported a healthy set of Q2FY21 numbers. Dollar revenues increased 3.9% QoQ to US$136 million, mainly led by 5.3% QoQ increase in services revenues (83% of revenues) partially offset by 3.0% QoQ decline in IP led revenues. Rupee revenues increased 1.7% QoQ to Rs 1007 crore. In terms of verticals growth was led by technology companies & emerging vertical (up 4.5% QoQ) and financial services (up 4.2% QoQ). In terms of geography, growth was led by Americas (up 7.1% QoQ), partially offset by Europe (declined 22.6% QoQ due to absence of large one-time IP deal in the current quarter). The EBITDA margin expanded 160 bps QoQ to 16.4% mainly led by 170 bps increase in gross margins.
Further, considering multiple levers for cost rationalisation, margins are expected to see an improved trajectory in the long term. Hence, we maintain our BUY rating with a revised target price of Rs 1,380 (18x FY23E EPS).
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