Buy Persistent Systems; target of Rs 5910: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Persistent Systems has recommended buy rating on the stock with a target price of Rs 5910 in its research report dated April 24, 2025.

Broker Research

April 25, 2025 / 19:54 IST

Buy

Prabhudas Lilladher's research report on Persistent Systems

The revenue performance (+4.5% QoQ) was tad below our estimates (+5.2% QoQ CC), while margins were fairly in line. The momentum within Hi-Tech and BFSI accelerated in Q4, while Healthcare growth decelerated further. Healthcare growth is expected to deteriorate even further due to Medicaid funding cut and large deals assuming support phase in FY26. The management indicated that the recent rejig has elevated caution on decision making among few Healthcare clients. However, the outlook on Hi-Tech and BFSI remains strong, which should drive growth in the subsequent quarters. We believe the company’s operations are relatively stable due to missing presence in tariffsensitive verticals and having robust playbook in the non-discretionary areas. The improved NN TCV of USD 1.4 bn (+20.7% YoY) and NN ACV of USD 810 mn (16.5% YoY) further reinforces our arguments. On margins, it expects to maintain the utilization rate at the current level while right shoring would support margins. The one-off benefit (earnout reversal) of ~120bps YoY enjoyed in FY25 would be missing in FY26, although the Q4 run-rate marginally (+20bps) contributed on such benefit. Hence, largely di-risking the ask-rate to improve margins in FY26. We are building in CC revenue growth of 16% and 18% with margin improvement of 30bps and 50bps YoY.

Outlook

We are keeping our PE multiple unchanged at 43x with a target price of INR 5,910. However, as the stock has corrected ~20% since Jan. 25 we are upgrading our rating to “BUY” from Accumulate earlier as we can expect a decent upside from the current level.

For all recommendations report, click here