Shares of Persistent Systems jumped 6 percent intraday on Wednesday as CLSA has initiated coverage with a buy rating and a target price of Rs 1000 per share. According to the brokerage, Persistent’s improving business mix towards enterprise aided by its strong tech capability, IP and early focus make it the ideal play on the disruptive industry trend.
It expects social, mobile, analytics and cloud (SMAC)/digital to drive acceleration in dollar-revenue growth to 18 percent, earnings per share (EPS) growth of 21 percent FY16-18 and a re-rating to sector leading multiples.
CLSA also feels that the software company’s margins will recover by 240 basis points (bps) over FY15-18, with further onsite thrust counter balanced by higher billing rates (digital) and scale benefits on sales investments and improving staff pyramid.
“We expect Persistent to accelerate its revenue growth from 14 percent over FY12-15 to 17 percent over FY15-18 powered by strong growth from rising proportion of digital services for enterprises and IP business. There may be some drag from its legacy business as several hi-tech clients deal with disruption of their business modelsleading to choppy contracting and projects growing at ~5% revenue CAGR,” it says in a report.
At 09:39 hrs Persistent Systems was quoting at Rs 805.00, up Rs 31.80, or 4.11 percent on the BSE.
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