Buy Persistent Systems; target of Rs 1000: P Lilladher

Prabhudas Lilladher's report on Persistent Systems

"Persistent Systems (PSYS) along with Zinnov have undertaken an exercise to build training program for the sales team. The company has migrated from technology to business oriented sales team hiring. Moreover, marketing exercise for the success of “Enterprise Digital Transformation” (EDT) is likely to continue. We expect PSYS’ strategy to drive growth in EDT would accelerate revenue momentum for BFSI vertical (PLe: 25%+ YoY) in FY16."

"PSYS has not made any major IP-led acquisition in FY15. We expect inorganic growth to be renewed in FY16 driving 20%+ YoY revenue growth in IP. The acquisition is likely to be in accordance with their current strategy. We expect closure of deal over the next six months. PSYS focus is to maintain PBT margin in narrow range of ~20%. Moreover, focus on EDT would drive better realization per person. We see bottoming out of EBITDA margin in Q3FY15."

"PSYS earnings momentum got impacted by Top Clients ramp-down, and reinvestment in S&M effort. We expect that with the ramp-down coming to an end, and S&M expense likely to be sustained at the current level, earning momentum will track revenue growth in FY16. We upgrade PSYS to “BUY” with a TP of Rs 1,000", says Prabhudas Lilladher research report.

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