Reduce Persistent Systems; target of Rs 5989: KR Choksey

Reduce

KR Choksey's research report on Persistent Systems

PSYS delivered 22.6% YoY revenue growth in Q3FY25, driven by strong vertical performance and acquisitions. EBIT grew 25.5% YoY, while PAT surged 30.4% YoY, reflecting improved margins and robust execution. However, the outlook for FY24-FY27E (Revenue/PAT: 20.1%/ 25.1%) suggests a notable deceleration in growth compared to its historical performance, indicating a potential slowdown in momentum. We revise our EPS estimates for FY26E/FY27E upwards by 8.0%/8.2% to INR 110.9/137.3, respectively (previously INR 102.7/126.9), factoring in Q3FY25 performance, strong deal wins, along with margin expansion.

Outlook

Rolling over our valuation to FY27E and assigning a P/E multiple of 54.0x, we arrive at a target price of INR 5,989 (earlier: INR 5,441). Furthermore, the stock is currently priced at an all-time high 1-Year Forward P/E of 70.2x, significantly exceeding its three-year average of 35.6x. This widening gap between the stock's price and its fundamental performance raises concerns about the risk-reward profile. As a result, we maintain our "REDUCE" rating, reflecting a cautious view on PSYS shares.

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Persistent Systems - 24012025 - kr