Persistent Systems Q2 Review - Strong Order Book, Execution; Valuation Limit Room For Error: Dolat Capital

Dolat Capital Report

Persistent Systems Ltd. posted healthy revenue of $292 million, up 3.2% QoQ in constant currency terms (our estimate: 3%), led by growth in software, tech and emerging vertical (up 3.8% QoQ).

Operating profit margin stood at 13.7%, up 88 basis points QoQ (our estimate: 13.6%), despite wage hike as it had tailwinds in absence of 210 bps one-time celebration costs in Q1.

Persistent Systems' total contract value/annual contract value stood $479 million/316 million, up 26%/16% QoQ respectively, but trailing twelve months ACV coverage continues to be sluggish at 1.1 times (last quarter 1.1 times as well).

Q2 saw sustained TCV wins and execution, company aims to deliver industry leading growth.

However, we believe positives are well priced in, and hence Maintain 'Sell' rating with target price of Rs 4,760 at 25 times FY26E.

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