Persistent Systems Q3 Results Review - Robust Execution; Resilient Outlook to Support Growth: Axis Securities

Axis Securities Report

In Q3 FY24, Persistent Systems Ltd. reported revenue of Rs 2,498 crore, up 3.6% QoQ and 3.0% QoQ (in constant currency terms) which stood in line with our expectations. The company’s operating profit stood at Rs 442 crore, reporting growth of 9.1% on a QoQ basis.

Much in line with our expectations, the company’s operating margins improved by 90 basis points to 17.7%, largely led by lower operating costs and lower onsite expenses. The company’s net profit for Q3 FY24 stood at Rs 286 crore, registering a growth of 8.7% QoQ.

Outlook

From a long-term perspective, we believe Persistent is well-placed for encouraging growth, given its multiple long-term contracts with the world’s leading brands. Its improved revenue visibility gives us confidence in its business growth moving forward.

However, rising concerns over the prospects of large economies along with prevailing supply-side constraints pose uncertainties over the company’s short-term growth rates.

Valuation and recommendation

We assign a 36 times price earning multiple to its FY26E earnings of Rs 239.1/share to arrive at a target price of Rs 8,700/share, implying an upside of 10% from the current market price. Hence, we recommend a 'Buy' rating on the stock.

Key risks to our estimates and target price

• The demand environment is uncertain because of the potential threat of the recession from the world’s largest economies.

• The rising subcontracting cost and cross-currency headwinds may impact the company’s operating margins negatively.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.