KR Choksey has given Accumulate recommendation for Persistent Systems with a target price of Rs. 4131 in its research report issued on Oct 21, 2022
KR Choksey’s research report on Persistent Systems
Persistent Systems Limited (PSYS) Q2FY23 performance was slightly higher than our estimate. Dollar Revenue was up 5.6% QoQ to USD 255.6Mn (KRChoksey est. USD 254Mn). Rupee revenue grew by 9.1% QoQ to INR 20,486Mn (KRChoksey est. INR 20,272Mn). Reported operating margin was marginally higher at 14.6%, aided by IP-business performance, lower sub-con cost & better segmental margin from Tech vertical & absence of visa cost which was partially offset by wage hike (-230bps). Reported net profit grew by 4% QoQ to INR 2,200Mn (KRChoksey est. INR 2,186Mn) with margin of 10.7%, down 53 bps QoQ. Persistent remains confident of maintaining operating margins within a narrow range in FY23 aided by growth leverage/revenue mix. PSYS’ profit is expected to increase materially over FY22-25E, supported by continued client mining (USD 5mn+logos doubled in the last two years) and increase in deal size (net-new deal duration increased from 1.2 years to 1.7 years over the last two years).
Our target price of INR 4,131 is based on 28.5x Mar-24E EPS with EPS CAGR of 26.7% over FY22-24E.