With a market capitalisation of Rs. 54,946 crores, the shares of Persistent Systems Ltd started Thursday’s trading session on a higher note at Rs. 6,940 compared to its previous close of Rs. 6,996.60. The share hit a high of Rs. 7,168.80, gaining around 3 percent and currently trading at Rs. 7,146 apiece.
Having a look at the latest financial statements published by the company, the revenue and profits have shown a positive movement.
Looking at the financial statement, the company’s revenue increased marginally by 4 percent from Rs. 2,321 crores in the June quarter to Rs. 2,411 crores in the September quarter. In addition, the net profit increased by around 15 percent from Rs. 228.77 crores to Rs. 263.27 crores during the same timeframe.
Due to consistent operating revenue and profits on a YoY basis, the profitability metrics of the company increased with the return on equity (RoE) increasing from 23 percent during FY 21-22 to 26.36 percent in FY 22-23.
Moreover, the return on capital employed (RoCE) showed an upward movement from 28.36 percent to 31.44 percent during the same timeframe. On a contrasting note, the net profit margin decreased from 12.09 percent during FY 21-22 to 11.03 percent during FY 22-23.
HDFC Securities, one of the well-known brokerage firms, has given a ‘Buy’ target on the company’s stock with a target of Rs. 8,530 indicating a potential upside movement of around 20 percent compared to its current market price.
The investment rationale for providing such a recommendation pertains to the consistent deal velocity. Persistent Systems has consistently secured deals exceeding USD 50 million, with a significant portion focusing on managed services and cost optimization.
The brokerage mentioned that the company’s deals have remained strong, and Q3FY23 is expected to see an uptick in project renewals, the broker expects growth in the deal booking (total ACV) ) at 10 percent, 18.5 percent, and 18.9 percent respectively for FY24,25, and 26.
Furthermore, the brokerage firm stated that the company has strong digital prowess and partnerships like 15 thousand certifications across Microsoft, AWS, Google Cloud, Salesforce, and IBM, and the recent acquisition of enterprise software platforms of Software AG has created strategic partnerships and incremental engagements for the company.
The broker mentioned the company’s pedigree to drive growth leadership in GenAI areas as they have already engaged in PoCs with over 60 clients. With strong engagements and partnerships with AWS and Microsoft to support building GenAI solutions and exchange of technology.
In the past few months, the company has added senior hires from tier-1 IT. Some of the hires include the Chief Marketing Officer (former Wipro), Head of Hyperscalers business unit and Global Partnerships (former Microsoft), and a few more. So, the brokerage firm believes that the recent induction of senior management can boost business scalability and drive larger client engagements.
The broker mentioned that the company remains attractive in the mid-tier IT space and expects growth in EPS by 26 percent over FY24-26. Moreover, HDFC Securities revised its initial target of Rs. 6,705 to Rs. 8,530.
Headquartered in Pune, Persistent Systems Ltd was incorporated in 1990. The company provides software engineering and strategy services to help companies implement and modernize their businesses. It has its software and frameworks with pre-built integration and acceleration. It also has partnerships with providers such as Salesforce and AWS.
Written By Vaibhav Patil
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