Persistent Systems - Worries On Margins To Recede: Motilal Oswal

Motilal Oswal Report

Since our rating upgrade to Buy on July 19, 2024, Persistent Systems Ltd. has outperformed both the benchmark Nifty Index and the Nifty IT index (the company gained 15% versus 3% for Nifty and 7% for NSE IT).

We estimate an 18% USD revenue compound annual growth rate for Persistent Systems over FY24-FY27, which, combined with margin expansion, could result in a ~21%+ earnings per share CAGR.

This positions Persistent Systems in a league of its own as a diversified product engineering and IT services player, justifying a premium valuation multiple. That said, owing to its superior earnings growth trajectory, on PEG basis, we believe the valuation still has room for upside.

We introduce FY27 estimates and roll over to Sep’26E EPS. Reiterate Buy with a target price of Rs 6,300, based on 50 times Sep’26E EPS.

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