Neutral Persistent Systems; target of Rs 8110: Motilal Oswal

Motilal Oswal's research report on Persistent Systems

Persistent Systems (PSYS) delivered 3QFY24 revenue of USD300.6m, up 3.1% QoQ in CC terms, in line with our estimate. Deal win TCV was at a record high (USD 521m), aided by strong wins and renewals in North America. EBITDA margin at 17.7% (up 90bp QoQ) beat our estimates; the improvement was attributed to seasonality in IP business and SG&A optimization. PSYS’s 3QFY24 revenue performance was positive, although the growth was skewed toward Healthcare and Life (up 16% QoQ); the other two verticals reported muted growth. Despite a seasonal furlough, the deal TCV recorded yet another quarter of strong growth, up 8.8% QoQ (vs +26% QoQ in 2Q), translating to 1.7x BTB.

Outlook

We believe PSYS’ valuation appropriately factors in the favorable growth along with the adverse macro environment. We value the stock at 37x FY26E EPS. We reiterate Neutral as we see limited upside from the current levels.

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