Buy Persistent Systems; target of Rs 5776: ICICI Securities

ICICI Securities research report on Persistent Systems

Persistent Systems (Persistent) reported largely in line Q1FY24 revenue growth of 3% QoQ USD (17.1% YoY USD) and 2.9% QoQ CC driven by strong growth in BFSI (+6.2% QoQ USD) and hi-tech (+3.2% QoQ USD), partially offset by a decline of 2.7% in healthcare. There was a miss on EBIT margin that came in at 14.9%, -50bps QoQ (ISEC: 16%, cons: 15.4%). During the quarter, there were headwinds from H1B visa costs (+40bps), work from office related costs (+20bps) and higher D&A charges (+10bps). Deal wins were muted with TCV at USD 380.3mn, -3% YoY, -10% QoQ and ACV at USD 271.9mn, 3% YoY and -12% QoQ due to spill over of deal closures from Q1 to Q2FY24. Management expects softness in next 1-2 quarters with growth at 2-4% QoQ (vs 3-5% QoQ earlier) if macros remain weak in the near term.

Outlook

We reiterate our BUY rating on PSYS with a revised 12-month target price of INR 5,776, implying 21% potential upside.