Persistent Systems Ltd. share price target

We recommend BUY and assign 17x P/E multiple to its FY23E earnings of Rs. 91.0 per share which gives a TP of Rs. 1,735 per share, an upside of 14%.

For the first time the company reported its order book, which is US$302 million (book to bill of ~2x) of which US$175 million is net new. We believe this is mainly due to traction in multi-year large deals in services and IP led segment (benefits of which will be reflected in Q1FY22E). The company has also hired 1618 employees of which 70% are laterals representing robust growth opportunity in coming quarters. In addition, Persistent's focus on client mining, scaling up new clients, expanding European geography (from 9% to 15-18% in next three four years) and improving its alliance business...

Persistent Systems headquartered in Pune, India offers specialized services in cloud computing, digitization, business analytics etc. Persistent has established strong leadership in few verticals viz., Enterprise software, Consumer Software, Innovation Services etc.

Background: Persistent Systems is one of the leading outsourced product development (OPD) companies in India. Revenue from business offering mix: Services (83.7%) & IP led business (16.3%). The company has industry expertise in ISV (41.7%), Enterprise (42%) and IP Led (16.3%). The company's business is spread across North America (80.2%), Europe (8.8%), and RoW (11%).Company earns revenue from global delivery centers (33%), India (50.7%) and IP Led (16.3%). Total active clients stood at 1000+ including services and IP led business. Company's top client accounts 19.2% in revenues, top 5 (41.5%) and top 10 (49.9%)....

The company's greater than US$5 million clients has increased by five over the past two quarters led by its focus on mining existing clients and winning multi-year large deals. In the current quarter, Persistent won four large multiyear deals in technology & emerging companies and financial services. This is expected to lead to healthy annuity revenues in coming years. In addition, the company's focus on improving its alliance business and improving European revenues in services segment will help boost overall revenues. This coupled with Persistent's partnership with Red Hat, strong salesforce partnership, acceleration in digital revenues in a post Covid-19 world and...

We recommend BUY and assign 18x P/E multiple to its FY23E earnings of Rs. 78.0 per share which gives a TP of Rs. 1,404 per share, an upside of 18%.

Persistent reported inline revenue growth of 3.8% QoQ (Ple:3.2%) with strong performance from services business grew 5.3% QoQ to $114mn on 7.0% volume growth & IP-led revenue declined 3% QoQ to $22.1mn due to lower IP resale revenue. EBIT margin expanded by to 12.1% (Ple:10.9%) Gross margin expansion (+170 bps) was partially offset by higher SG&A; (-70 bps). Management guided current EBIT margin (12%) as sustainable inspite of salary hike in Nov-2021. Management expects to maintain EBITDA margin in...

Persistent reported sequential revenue growth of 3.9% (USD) and an EBIT margin of 12.1% (~170bp expansion), ahead of estimates. Growth was driven by the Services business, partly offset by the IP portfolio due to seasonality in the Reseller business. Broad-based performance was encouraging. Healthy growth in Services despite a high base indicated steady progress on the turnaround. Management commentary further implied a healthy deal pipeline in the Services business. We expect this vertical to continue to deliver even with...

Persistent Systems (PSYS) reported 3.9% QoQ dollar revenue growth, led by the services segment (+5.4% QoQ).

We retain our Buy rating on Persistent Systems Limited (PSL) with a revised PT of Rs. 1,450, as we expect strong earnings growth over FY2021-23E. Q2 numbers beat estimates on all fronts; deal signings remained strong for all...