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Reliance Securities
Persistent Systems (Buy)
CMP: ₹608.35
Target: ₹760
Persistent Systems is engaged in the business of building software products. The company offers complete product life cycle services. The company’s segments include infrastructure and systems, telecom and wireless, life science and healthcare, and financial services.
Persistent Systems in 2QFY19 posted a steep 4.3 per cent q-o-q dollar revenue decline, owing to a substantial 10.6 per cent q-o-q decline in IP revenue, while service revenue dipped 2 per cent q-o-q owing to a project getting completed earlier than expected, along with an offshore shift.
Enterprise performance was disappointing, with revenue down 1.2 per cent q-o-q owing to a decline in digital revenue (-1.7 per cent q-o-q).
We believe Persistent System’s long-term business direction remains on track, with focus on three key verticals — Healthcare, BFSI and MFG through four major services including Data, Artificial Intelligence (AI) & Machine Learning (ML), Cloud, Security and Internet of Things (IoT). We are enthused with renewed focus on specific growth areas and verticals, and appointment of new MD, which could be a key stock driver. Valuation at 11.2x FY20E EPS is one of the lowest in the industry. We have a ‘buy’ recommendation on the stock with a target price of ₹760.
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