Persistent Systems Ltd. reported strong revenue growth but a decline in net profit for the September quarter, with profitability and deal momentum emerging as key factors for investors. Brokerages remained divided on this AI and technology company as Kotak Securities maintained its Buy rating and raised its target price, while Citi retained its Sell rating and lowered its target as well.
The contrasting views reflect differences in the brokerages' assessment of the company's growth outlook, margin performance, and valuation.
Persistent Systems Q2 Results At A Glance
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- Net Profit down 27.1% At Rs 352 crore Vs Rs 483 crore
- Revenue up 8.3% At Rs 4,664 crore Vs Rs 4,303 crore
- EBIT up 1.57% At Rs 697.59 crore Vs Rs 686.8 crore
- EBIT margin at 14.95% Vs 15.96%
Kotak Securities On Persistent Systems: Maintained Buy
- Target Price Raised: Kotak Securities maintained its Buy rating on Persistent Systems and raised its target price to Rs 6,500 from Rs 6,250.
- Revenue Growth Remains Strong: The brokerage described the September quarter as reasonable, with robust revenue growth, although profitability was marginally lower.
- Deal Momentum Moderates: Growth in total contract value has slowed, but Kotak Securities believes the deal pipeline remains sufficient to support near-term growth.
- Medium-Term Outlook Remains Positive: The brokerage expects Persistent Systems to maintain its growth leadership over the medium term.
Citi On Persistent Systems: Maintained Sell
- Sell Rating Retained: Citi maintained its Sell rating on Persistent Systems and even lowered its target price to Rs 4,570 from Rs 4,650.
- Margins Under Pressure: The brokerage flagged weaker-than-expected margins and a sharp increase in intangibles as concerns.
- Valuations Remain Elevated: Citi believes the stock's premium valuation remains a key risk.
- Earnings Estimates Cut: The brokerage also lowered its FY27 and FY28 earnings per share estimates by 1% to 2%.
- Nagarro Performance In Focus: Citi identified Nagarro's performance as another key factor to watch in the near term.
Also Read: Persistent Systems Q2: Net Profit Falls 27% Even As Revenue Sees A Rise
What Investors Should Know
Persistent Systems' revenue growth remained strong in the September quarter, but the decline in net profit and Ebit margin highlights pressure on profitability. While Kotak Securities believes deal momentum remains sufficient to support near-term growth and expects the company to retain its medium-term growth leadership, Citi remains cautious about margins, rising intangibles, and premium valuations. Investors will also track deal bookings and Nagarro's performance for signals on the company's growth outlook.
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