Synopsis:
On 15th September, UBS initiated coverage on midcap IT stocks Mphasis and Persistent Systems, issuing “buy” ratings with target prices implying 26-27 percent upside, citing strong growth, margins, and GenAI positioning.
UBS, the largest global wealth manager and the leading bank in Switzerland, provides wealth management, banking and cash management, retirement and mortgage planning, and workplace wealth solutions.
It is an investment bank, offering corporate advisory, capital markets access, and trading and execution services, and asset management, providing diverse investment products along with research and market insights. UBS also provides online platforms for account management, cash management, and real-time market research, enabling clients to efficiently manage their finances.
On Monday, 15th September, brokerage firm UBS initiated coverage on two midcap IT stocks, Mphasis Limited and Persistent Systems Limited, issuing a “buy” recommendation and projecting potential upside of up to 27 percent.
Persistent Systems Limited
With a market cap of Rs. 83,831 crores, the stock moved up by around 1 percent on BSE, rising to Rs. 5,464 on Monday. Global brokerage firm UBS has initiated coverage on Persistent Systems with a ‘buy’ rating and a target price of Rs. 6,730 per share, representing a potential upside of nearly 26 percent from its current price levels.
UBS highlighted Persistent Systems for its strong execution capabilities, which contributed to it being the fastest-growing IT services company over FY2020-2025. The company has achieved the highest market share gains over the past five years, according to Gartner, while maintaining resilient margins that have improved by roughly 600 basis points—unlike many peers whose margins have remained flat or declined.
The brokerage also emphasised Persistent’s focused exposure to product engineering, limited reliance on legacy services, and robust positioning among mid-tier and large-cap peers to capitalise on the upcoming GenAI cycle.
According to UBS, the current valuation of around 44x one-year forward price-to-earnings assumes flat margins and a 14-15 percent revenue CAGR, which the brokerage considers conservative given the company’s growth potential.
In Q1 FY26, the company reported a significant growth of around 22 percent YoY in its revenue from operations to Rs. 3,334 crores, while the net profit also rose by nearly 39 percent YoY to Rs. 425 crores.
Mphasis Limited
With a market cap of Rs. 55,925 crores, the stock moved up by around 1.3 percent on BSE, rising to Rs. 2,940.55 on Monday. UBS, a Switzerland-based brokerage firm, has initiated coverage on Mphasis Limited with a ‘buy’ rating and a target price of Rs. 3,730 per share, representing a potential upside of nearly 27 percent from its current price levels.
UBS chose Mphasis largely for its near-term revenue growth potential, noting that this upside is not yet fully reflected in the current stock price. The brokerage noted that challenges related to a major client, DXC, its subsidiary Digital Risk, and certain vertical-specific issues have largely abated.
UBS projects Mphasis’ revenue to grow at a 10 percent CAGR over FY2025-2028, up from a 2 percent CAGR between FY2022-2025. Although current valuations are above the three-year average, they imply a revenue CAGR of 7-8 percent over FY2025-2030, compared to UBS’ estimate of 11 percent for the same period.
In Q1 FY26, the company reported a marginal growth of around 9 percent YoY in its revenue from operations to Rs. 3,732 crores, while the net profit also rose by nearly 9 percent YoY to Rs. 442 crores.
Written by Shivani Singh
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