Persistent Systems - Top-Client Drives Q4; Growth Confidence Builds Better Macros In H2: Dolat Capital

Dolat Capital Report

Persistent Systems Ltd. posted healthy revenue of $275 million, up 3.5% QoQ in constant currency terms. (Our estimate: 3.1%), led by top-client growth of 30.5% QoQ. Excluding top-client, revenue growth moderated at 1.7% QoQ.

Annual contract value degrew by 5% QoQ and on trailing twelve months basis implies revenue coverage of just 1.13 times (last quarter 1.15 times).

Organic growth trajectory further slowed down to 19.6% YoY (last quarter 22.8%). Thus, suggesting further moderation in growth hereon.

Persistent Systems' operating profit margin stood at 15.4%, flat on QoQ basis (our estimate: 15.3%). Tailwind of better fresher billing was offset by travel costs and annual employee engagement events. Announced dividend per share of Rs 22.

Revival in top-client was marred by weak non-top client growth, while meaningful margin recovery will remain limited given declining growth rates (mgmt. remain confident on this).

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