Prabhudas Lilladher's research report on Persistent Systems
Persistent reported revenue of $182.3 mn, growth of 9.3% QoQ USD, much above our and cons estimates (Ple: 8%, Cons: 6.3%). Growth was strong across all three verticals. Onsite price declined (-2.7% QoQ) due to change in onsite mix led by – 1) lower share of revenue in Europe due to seasonality and 2) higher share of revenue from near shore delivery centres like Mexico and Canada. We believe Persistent can deliver strong growth (~32.6% YoY) given 1) strong deal TCV of $282.5 mn, +15.4% QoQ, with 53% net new wins in Q2 and TTM TCV of $1075.8 mn and 2) strong headcount addition with total headcount up 47% YoY. Management aspires to reach $1Bn annual revenue run-rate in next 1.5-2 years.
Outlook
Our EPS estimates increase by 0.7%/1.5%/3.1% for FY22/23/24 led by revenue increase in revenue growth estimates. We arrive at DCF based target price of 4641 (implying target multiple of 41x on FY24 EPS). Persistent is currently trading at 38x/36x earnings multiple on FY23/24 EPS of INR 107/114 respectively. Persistent has Revenue/EPS CAGR of 17%/13% over FY22-24. Maintain Buy.
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