Motilal Oswal reiterates ‘Buy’ on Persistent Systems but Nomura, Emkay see valuation hurdle

Motilal Oswal reiterates ‘buy’ on Persistent Systems, Nomura, Emkay differ

Emkay and Nomura have lowered their target price of Persistent Systems, citing rich valuations, while Motilal Oswal has reiterated its Buy, citing growth visibility for the company, following the March quarter earnings, with the shares higher by 2 percent on April 25 in a weak market.

In its note, Emkay increased its FY26-27e EPS for Persistent Systems by approximately 1-3%, but maintained a ‘Reduce’ rating and target price of Rs 5,000 due to high valuations, reflecting a downside of 3%.

Nomura too has lowered target price to Rs 5,000 at 36x FY27e EPS as opposed to Rs 5,600 earlier, accounting for the rising macro risks. A Neutral rating has been retained given the stock’s rich valuation, and the brokerage prefers Coforge in the mid-cap India IT services space.

Motilal Oswal, however, remains optimistic on Persistent Systems and has reiterated its ‘buy’ amid a ‘steadfast quarter’, citing good growth visibility ahead. They expect Persistent Systems’ revenue/EBIT/PAT to grow by 23.4%/41.3%/9.4% YoY in 1QFY26. The Brokerage values Persistent Systems at 45x FY27E EPS. Motilal Oswal reiterated its ‘Buy’ with a target price of Rs 6,450.

The management is aiming to expand margins by 200 basis points in the medium term, targeting ~$2 billion in revenue by FY27e, driven by non-linear revenue growth, AI platform leverage, and profitability focus.

Persistent Systems reported a consolidated net profit of Rs 395.76 crore for the March quarter, a rise of nearly 25.5 percent from a year ago, with revenue from operations rising over 25 percent year-on-year to Rs 3,242 crore in Q4 FY25. Persistent Systems’ revenue growth was led by BFSI (6.1% QoQ) and Hi-Tech (5.2%). Emkay Global noted a robust revenue growth with margin beat as well as weakness in Healthcare & Lifesciences, for the March quarter.

Emkay said that Persistent Systems’ clients are being cautious with spending owing to delayed decision-making, yet the management is confident of navigating the uncertainty and maintaining growth. Persistent Systems is focused on cost optimization and vendor consolidation opportunities. Healthcare is affected by cost cuts by America's DOGE along with cuts in US Aid funding, affecting government-funded healthcare plans. Excluding the top client, Healthcare saw a sequential decline. However, management remains confident about its long-term prospects.