Persistent Systems - Institutional Research Desk at HDFC Securities

Strong bookings provide growth visibility

Persistent Systems (PSYS) posted an in-line revenue and a slightly better operating performance. Key positives include (1) deal bookings, which were at an all-time high-both renewals and net-new TCV, which provides adequate growth visibility (9MFY23 net-new ACV ~55% of revenue-rate) and positive commentary on Q4 order bookings; (2) focus on larger deals with annuity and progress in client mining, reflected in USD 5mn+ client count increasing from 30 in Q2 to 34 in Q3 and continued increase in revenue per account (up 50% since pre-covid); and (3) recovery expected in T2 accounts, which has been a growth headwind in recent quarters (T50 accounts ex-T2 grew ~8% QoQ). PSYS attaining its margin aspiration of 200-300bps increase in 2-3 years is an upside risk to our estimates. Maintain BUY on PSYS (top pick in mid-tier IT) with a TP of INR 5,230, valued at 32x Sep-24E EPS. Valuation drivers (currently at 28.5x FY24E) include industry-leading 25% EPS CAGR over FY22-25E, ~50% RoIC and improving FCF and payout.

Shares of Persistent Systems Limited was last trading in BSE at Rs. 4323.75 as compared to the previous close of Rs. 4257.55. The total number of shares traded during the day was 26031 in over 3635 trades.

The stock hit an intraday high of Rs. 4361.00 and intraday low of 4234.40. The net turnover during the day was Rs. 111716116.00.

Source : Equity Bulls

Keywords

PersistentSystems INE262H01013 Q3FY23 ResultUpdate HDFCSecurities