Hold Persistent Systems; target of Rs 5890: Prabhudas Lilladher

Prabhudas Lilladher's research report on Persistent Systems

The revenue performance (+3.3% QoQ) was tad below our estimates (+3.5% QoQ CC), margins at 15.5% were also slightly below our estimates of 15.7%. The momentum within BFSI and Hi-Tech continued, while Healthcare growth decelerated further and reported a decline of 1.9%. The delayed ramp up and right-shifting of resources have led to the decline in Healthcare vertical. The management expects Healthcare to rejoin steady state and report growth for the rest of the year. The outlook for Hi-Tech and BFSI remains strong, attributed to the robust deal pipeline and improved growth profile. Although the NN deal TCV looks weak (+8.4% QoQ) in Q1, the large deal pipeline and executable order book remain healthy. We believe the company’s growth profile outside the top healthcare account remains strong and should continue to balance the equation through other two pillars. On margins, with the right shifting of resources, the subcon can be optimized further, while peak in utilization provides limited scope of margin improvement.

Outlook

We are keeping our estimates unchanged. We are building in CC revenue growth of 15.4% and 17.8% with margin improvement of 30bps and 50bps YoY. We are keeping our PE multiple unchanged at 43x & arriving at a target price of INR 5,890. Retain HOLD.

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Persistent Systems - 24072025 - prabhu