Persistent Systems - Q4FY22 Result Update - Consistent strong performance - BUY

Ms. Aditi Patil, Research Associate at Prabhudas Lilladher.

Quick Pointers:

- Aspire to maintain EBIT margins at ~14%; but growth will remain first priority.

- TTM ACV at $943.1mn with Book-to-bill at 1.23x and 36% YoY growth in headcount indicate strong revenue growth momentum in FY23.

Persistent delivered consistently strong (9%+ QoQ) revenue growth since past four quarters. We believe it will continue to deliver industry leading growth and model 33.5% YoY USD growth in FY23E given - 1) strong TTM ACV of $943.1mn with book-to-bill at 1.23x, 2) incremental revenue contribution (~11%) from acquisitions, 3) opportunity to capture higher share of fast growing cloud services market led by strengthened hyperscalar partnerships due to Data Glove and Media Agility acquisitions and expansion of Payments BU (SCI acquisition). Flattish QoQ EBIT margins in Q4, dip in LTM attrition (-30bps QoQ) and aspiration to maintain EBIT margins at FY22 levels (~14%) is impressive. We believe margins can be maintained (13.8% in FY23E) aided by tailwinds from revenue growth leverage, pyramid optimization, improvement in margin profile of one of the IP deal, improved pricing and currency depreciation.

Our EPS estimates remain largely unchanged. We arrive at DCF based target price of Rs. 4915 (earlier Rs. 5160) with implied target multiple of 38x (earlier: 40x) factoring increase in risk free rate to 7.2% (earlier 6.8%). Persistent is currently trading at 37x/33x earnings multiple on FY23/24 EPS of INR 116/131 respectively with Revenue/EPS CAGR of 24%/23% over FY22-24. Maintain Buy.

Shares of Persistent Systems Limited was last trading in BSE at Rs. 4312.65 as compared to the previous close of Rs. 4311.30. The total number of shares traded during the day was 21462 in over 4512 trades.

The stock hit an intraday high of Rs. 4390.00 and intraday low of 4282.65. The net turnover during the day was Rs. 93163872.00.

Source : Equity Bulls

Keywords

PersistentSystems INE262H01013 Q4FY22 ResultUpdate PrabhudasLilladher