Buy Persistent Systems: target of Rs 1720: Sharekhan

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Sharekhan's research report on Persistent Systems

We expect USD revenue to grow by 5% q-o-q to $142.9 million (excluding revenue from re-seller deal) in Q3FY2021, led by healthy growth in TSU business and strong seasonality in Alliance business. EBIT margin is expected to improve by 10 bps q-o-q in Q3FY2021 despite two-month impact of wage hike and increased hiring. Headwinds would be offset by higher Alliance revenue and rising offshoring revenue. Cash and cash equivalents account for 15% of its current market capitalisation; strong balance sheet and potential strong earnings growth (22% CAGR over FY2021-FY2023E) provide us comfort on the stock despite the recent run up.

Outlook

We retain our Buy rating on Persistent Systems Limited (PSL) with a revised PT of Rs. 1,720, given anticipated strong revenue growth in FY2022E and FY2023E.

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