Persistent Systems Ltd - Cut to REDUCE on expensive valuations - Emkay

Reco: REDUCE
CMP: Rs 986
Target Price: Rs 870

- We cut Persistent to REDUCE with a revised TP of Rs 870 (based on 10x FY16E EPS) given expensive valuations at ~13.4x/11.5x FY15/16 P/E on aggressive growth assumptions.

- Linear IP business growth remains tardy; co intends to focus on "Enterprises' beyond Tech Product companies. Platform and IP business on a healthy wicket.

- Tweak FY15/16E EPS higher by 1/6% each to Rs 74/87 as we forecast a 17% US$ rev CAGR over FY14E-16E( implying ~4% CQGR in Linear business, 21% CAGR for IP Revenues).

- Valuations at the upper end of other mid tier peers (on aggressive growth assumptions) and on par with Tier I names like HCL Tech.

Source : Equity Bulls

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