Neutral Persistent Systems; target of Rs 4360: Motilal Oswal

Motilal Oswal recommended Neutral rating on Persistent Systems with a target price of Rs 4360 in its research report dated January 20, 2023.

Broker Research

January 21, 2023 / 15:55 IST

Motilal Oswal's research report on Persistent Systems

Persistent Systems (PSYS) reported a 3.5% growth in constant currency (CC) terms in 3QFY23. In USD terms, revenue grew 3.4% QoQ led by strong growth in IP business (+8.6% QoQ) while growth in services was lower at 3.0% QoQ. EBITDA margin was strong and stood at 18.5% (est. 17.9%). Employee addition was modest (+122 QoQ), while attrition moderated 210bp to 21.6%. The company’s performance in Services (+3% QoQ) moderated due to furloughs and ramp-down by a top client. PSYS expects a revival in top client growth over the next few quarters, which together with record TCV (USD 440m, book-to-bill ratio of 1.7x) should aid topline growth amid a weakening macro environment. Its ability to win new deals is encouraging and should help deliver another year of industry leading growth.

Outlook

PSYS is trading at a rich valuation of 28x FY24E P/E and on the higher side of the Midcap IT median valuation. It adequately factors in favorable growth and demand environment. Hence, we maintain our Neutral rating with a TP of INR4,360 as we see limited upside from current levels.

For all recommendations report, click here