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KRChoksey Research Report
Persistent Systems Ltd.'s Q2 FY23 performance was slightly higher than our estimate. Dollar revenue was up 5.6% QoQ to $255.6 million (our estimate: $254 million). Rupee revenue grew by 9.1% QoQ to Rs 20,486 million (our estimate: Rs 20,272 million).
Reported operating margin was marginally higher at 14.6%, aided by intellectual property business performance, lower sub-con cost and better segmental margin from tech vertical and absence of visa cost which was partially offset by wage hike (down 230 bps).
Reported net profit grew by 4% QoQ to Rs 2,200 million (our estimate: Rs 2,186 million) with margin of 10.7%, down 53 bps QoQ.
Persistent remains confident of maintaining operating margins within a narrow range in FY23 aided by growth leverage/revenue mix. The company's profit is expected to increase materially over FY22-25E, supported by continued client mining ($5 million plus logos doubled in the last two years) and increase in deal size (net-new deal duration increased from 1.2 years to 1.7 years over the last two years).
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