Hold Persistent Systems; target of Rs 1400: Sharekhan

Sharekhan has recommended a hold rating on Persistent Systems (PSL) with a target price of Rs 1400 per share in its October 20, 2014 research report.

October 28, 2014 / 15:17 IST

26 Aug, 2025 12:21

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Sharekhan's report on Persistent Systems (PSL)

"For Q1FY2015 Persistent Systems (PSL) reported a 5% Q-o-Q growth in revenues to $76.3 million. The growth was led by a 5.6% Q-o-Q growth in the IT services business to $61.4 million, the highest growth in the 12 quarters. The volume of the IT services business rose by 3% QoQ and its realisation grew by 2.6% QoQ whereas the IP business-led revenues grew by 2.9% QoQ to $14.9 million. In rupee terms, the revenues were up by 6.7% QoQ to Rs 464 crore."

"For the quarter the EBITDA margin declined by 120BPS QoQ to 20.6%, the lowest in 11 quarters. In the last four quarters, the margins have declined by around 710BPS from a high of 27.7% in Q3FY2014. The fall in the OPM was led by annual wage hikes coupled with an increase in the SG&A cost, which rose by 14.4% QoQ. Both forex and other incomes contributed positively and grew by 16.6% and 19.4% QoQ respectively. The net income for the quarter was up by 3.6% QoQ and 17.3% YoY to Rs71.3 crore."

"In the last 20 days, PSL has corrected by close to 15% from its high of Rs1,480. At the current market price of Rs1,268 the stock trades at 16x and 14x FY2015 and FY2016 earnings estimates. The Q2FY2015 earnings do not have positive surprises to trigger earnings upgrades or re-rating from the current levels, Thus, we maintain our Hold rating on the stock with an unchanged price target of Rs 1,400. However, PSL's SMAC oriented business model (SMAC is a strong growth area), strong balance sheet (cash of Rs693 crore, at 42% of the balance sheet size) and good corporate governance make it a good investment bet for the long-term investors", says Sharekhan research report.

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