Motilal Oswal's research report on Persistent Systems
Persistent Systems (PSYS) delivered 1QFY24 revenue of USD282.9m, +2.9% QoQ in CC/+3.0% QoQ, in line with our estimates. Growth was led by IP business (up 8.0% QoQ), while Service business grew 2.7% QoQ. EBITDA margin was at 18.2% (down 30bp QoQ), a tad below our estimate of 18.4%, due to higher Visa cost (~40bp impact). PSYS added 241 employees in 1QFY24, while attrition moderated sharply (15.5%, down 430bp QoQ). PSYS’ 1QFY24 revenue performance was positive, especially in the environment when execution remains a challenge. Despite BFS industry headwinds, it was up 6.2% QoQ, although management indicated softness in the near-term. Top accounts posted healthy growth with top 5/top 10 accounts increasing 13%/8% YoY in 1QFY24.
Outlook
The stock is currently trading at 26x FY25E EPS. Our TP is based on 25x FY25E EPS. We reiterate our Neutral rating as we believe the positives have already been captured and the stock offers limited upside from current levels.
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