Target: ₹6,170
CMP: ₹5,717.70
Persistent Systems (PSYS) has reported 5.3 per cent cc q-o-q revenue growth, ahead of our expectation of 4 per cent. Spread of growth improved too. Healthcare & Lifesciences as well as BFSI grew in high-single digit sequentially. It is difficult to find chinks in PSYS’ growth story.
PSYS has protected its book of-business – reflected in steady renewals. It was won fair share of clients’ wallet – reflected in healthy net new deal wins. And it has done these across clients – reflected in consistent movement of clients up the revenue buckets.
Improving outlook in Hi-tech, led by its AI-led platform offerings will further balance its growth. Importantly, even margin fluctuations appear to be behind now. PSYS negated multiple margin headwinds in Q2, largely through operational efficiencies. This should address investor concerns of one-offs driven margin improvement not sustaining.
As we noted in our recent note, PSYS has sufficient levers to achieve FY25-exit margins of 15.5 per cent, setting it up for a healthy expansion in FY26. Our EPS changes are limited as higher revenue estimates are offset by share dilution (due to ESOPs). Such consistent performance in a still uncertain demand environment merits premium multiples.
We continue to value PSYS at 48x to arrive at our revised TP of ₹6,170 (from ₹6,080).