Buy Persistent; target of Rs 700:Axis securities

Axis securities's research report on PersistentPersistent kicked-offH2FY16 on a strong note with 8% QoQ revenue growth led by Enterprise segment (29% of rev, 16% QoQ growth). In EDT^, Financial Services and Healthcare continue to be key growth verticals. IP business (20% of rev) recorded strong growth of 34% QoQon equal contribution from organic business and Aepona acquisition.H2 seen better, margin upsides persist: Management expects H2 to be better than H1, driven by healthy deal pipeline and deal wins. While investments in S&M and leadership roles will increase, we believe current PBT margin of ~17% has upside potential from improvement in Aepona profitability (~3% annualized revenue share), absence of integration costs (50 bps) which were absorbed in Q3, better utilization and scale from IP/ EDT revenue. We expect USD revenue CAGR of 14%(FY14-16E: 12%) over FY16-18. In INR terms, we forecast revenue/PAT CAGR of 16%/ 19% led by PBT margin expansion of ~100 bps. Our TP ofRs700(15x FY17E EPS) implies 15% upside from CMP of Rs608; maintain BUY. The stock trades at 17x/13x FY16E/FY17E EPS.

Read More