Motilal Oswal's research report on Persistent Systems
Persistent Systems (PSYS) delivered 4QFY23 revenue of USD274.6m (+3.5% QoQ in CC/ +3.9% QoQ, ahead of our estimate of +3.0% QoQ in CC). 4Q growth was led by Services business (+5.5% QoQ), while IP-led business declined 14.6% QoQ due to seasonality. EBITDA margin was in line at 18.5%, as lower employee cost was offset by a spike in software royalty cost. PSYS added 1.9k employees in 4QFY23, despite moderating attrition (19.8%, down 180bp QoQ). We view PSYS’ 4QFY23 topline performance as positive, especially as the weak macro environment has resulted in cutbacks in discretionary spending. While this impacted growth adversely at a key Hyperscaler account (down USD3m QoQ), a rebound in its top account (up 30.5% QoQ) – post-declining for four quarters – more than offset the impact.
Outlook
Hence, PSYS’ valuation appropriately factors in favorable growth along with the adverse demand environment in our opinion. We maintain our Neutral rating as we see limited upside from current levels.
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