Buy Persistent Systems; target of Rs 840: HDFC Securities

HDFC Securities' research report onPersistent Systems

Persistent  posted  rev decline (in-line) and margin contraction with lower IP revenue. Revenue stood at USD 117mn, -4.6%/+7.3% QoQ/YoY impacted by USD 6.8mn  sequential decline in IP revenue (22.3% of 4Q rev). Services (46% of rev)  and  Digital  (24%  of rev) posted strong growth of 3.6% QoQ and 4.1% QoQ,  respectively, while Accelerite (6% of rev) and Alliance business (24% of  rev)  declined.

Outlook

Factored revenue/EPS growth of 10/14% CAGR over FY18-20E,  based on revenue  growth at  8.4/12.4%  and  EBITDA% at 16.2/17.0% for FY19/20E, respectively. Maintain BUY with TP of Rs 840, at 16x FY20E EPS.

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