Persistent Systems' Growth Story Remains Intact Post Q2 Beat; Top Brokerages Hike Target Price
CLSA has the highest upside potential projection for Persistent Systems, followed by JPMorgan and Macquarie.
Persistent Systems Ltd.'s growth momentum will likely continue, brokerages said after upbeat results for second quarter. JPMorgan, Nuvama, Emkay Global Research, and Nomura hiked target price for the stock.
JPMorgan is confident that Persistent System will retain growth momentum. The mid-cap company’s total contract value was the highest ever at $609 million. The brokerage is seeing broad-based growth across BFSI, healthcare, and Hitech.
Nomura raised earning-per-share estimates by 3–5% for financial years 2026 and 2028, respectively. Persistent Systems' deal wins, and pipeline are broad-based and not restricted to a few clients. The company reiterated its target to achieve $2 billion revenue by financial year 2027 and $5 billion over the next three-to-four years.
CLSA raised estimates and target price of Persistent Systems on improved execution visibility. The company is best positioned both from capability and execution standpoint, it said.
Persistent Systems Q2 Highlights (Consolidated, QoQ)
Revenue up 7.4% to Rs 3,580.70 crore versus Rs 3,333.50 crore
Net Profit up 11% to Rs 471.40 crore versus Rs 424.90 crore
Ebit up 13% to Rs 583.00 crore versus Rs 517.70 crore
Margin at 16.3% versus 15.5%
Persistent Systems's order book revived strongly to ensure long-term growth visibility. Its Ebit margin expanded significantly on the back of operating leverage and artificial intelligence, CLSA said.
Decline in software licence cost helped Persistent Systems to beat margin expectations, said both Nomura and Nuvama.
According Nuvama margin performance of Persistent Systems was strong, and the company has maintained the growth outlook. The brokerage has seen an improvement in demand pipeline across various clients who are open to increasing their spending.
Meanwhile, Emkay Global Research said that Persistent Systems reported a better-than-expected operating performance in the second quarter. While Persistent Systems' North America and European businesses witnessed a growth of 4.2% and 7.7%, respectively, India segment saw a decline of 2.1%.
Brokerages negative on increasing client concentration, Emkay Global Research said in a note.
