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HDFC Securities Institutional Equities
Persistent Systems Ltd.'s earnings growth is higher as compared to the mid-tier average and the stock currently trades at ~10% premium to the mid-tier average valuation.
Persistent Systems currently trades at 37 times and 29 times FY25/26E as compared to 3Y/5Y average at 33 times/25 times.
We factor in U.S. dollar revenue growth of 14.4%, 17.1% and 18.6% for FY24/25/26E and Ebitm of 14.7/16.0/17.0% for the same period, translating into an earnings per share compound annual growth rate of 28% over FY24-26E.
Our revised target price of Rs 8,530 is based on a 35 times FY26E valuation, led by growth leadership, margin expansion, and return metrics improvement.
On a PEG basis, Persistent Systems remains attractive in the mid-tier IT space and is our preferred pick.
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