Buy Persistent Systems; target of Rs 6280: Prabhudas Lilladher

Prabhudas Lilladher's research report on Persistent Systems

The revenue performance (+4.4% QoQ CC) exceeded our estimates (+3.7% QoQ CC), margin at 16.3% was also above our estimates of 15.8% in Q2. The growth was broad-based across verticals and geographies, BFS and H&L reported healthy growth of 7.0% and 3.8% QoQ. With sharp uptick in NN ACV (+20% QoQ) along with healthy mix of NN wins (60% of ACV) provides strong revenue visibility in the coming year. Even the deal funnel distributed broadly across verticals, including sub-segments of H&L. With healthy deal pipeline, we believe the broad momentum within verticals should continue in H2 along with broader AI theme on “AI for Tech” and “AI for Business”. On margins, it fairly exceeded our estimates by 60bps QoQ, in Q2 but we expect limited headroom for margin improvement in H2 due to compensation revision.

Outlook

We are revising our FY26 revenue growth to 16.8% YoY CC (15.4% earlier) that translates to ~3.1% CQGR for the rest of the year, while keeping the revenue growth for FY27E/FY28E largely unchanged. We roll forward our estimates to Sep’27 and assign 40x to arrive at a TP of INR 6,280. Retain BUY.

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