Buy Persistent Systems: target of Rs 4160: Sharekhan

Sharekhan's research report on Persistent Systems

We forecast PSL’s USD revenue to grow by 8% q-o-q to $180 million in Q2FY2022, led by broad-based demand and a recovery in IP-led revenues. We expect deal TCVs to stay healthy in Q2. We expect USD revenue/earnings to clock a CAGR of 20%/30% over FY2021-FY2024E, led by broad-based demand, robust deal TCVs, healthy deal pipeline, and new logo additions. EBITDA margin is expected to decline by 50 bps q-o-q to 15.9% in Q2 despite wage revision, aided by strong revenue growth, improving utilisation and higher IP revenue. Attrition is also likely to inch up.

Outlook

We retain a Buy on Persistent Systems Limited (PSL) with an unchanged PT of Rs. 4,160, given strong earnings growth potential, healthy cash generation and M&A opportunities.

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