Persistent Systems - Q1FY21 Company Update - ICICI Securities

Persistent reported healthy Q1FY21 numbers. The company reported positive QoQ growth (up 3.1% QoQ) in dollar revenues vs. QoQ decline in revenues across other IT companies. Further, the EBITDA margin increased 100 bps to 14.8% (including one-time Covid related donation of Rs. 7.4 crore). Adjusting for the one time, the margins could have been higher by ~74 bps.

Valuation & Outlook

The company has won a large vendor consolidation deal, which is expected to get ramped up in coming quarters. In addition, the focus of the new management on large annuity-oriented deals, increase in deal sizes and less reliance on top client bodes well for services growth in the long term (which is also visible in the near-term quarterly performance). Further, in a post Covid-19 world, we expect digital technologies to gain traction. Persistent is expected to be a key beneficiary of this digital acceleration. The company also has substantial cash on its balance sheet, which can be used for acquisition (to fuel growth). Further, considering multiple levers for cost rationalisation, we expect margins to see an improved trajectory in the long term. This, coupled with reasonable valuation of 14x P/E on FY22 EPS, prompts us to remain optimistic on the stock. Hence, we maintain our BUY rating on the stock with a revised target price of Rs. 1005/share.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Persistent_CoUpdate_Jul20.pdf

Shares of PERSISTENT SYSTEMS LTD. was last trading in BSE at Rs.884.25 as compared to the previous close of Rs. 855.5. The total number of shares traded during the day was 39964 in over 2474 trades.

The stock hit an intraday high of Rs. 897.9 and intraday low of 840.85. The net turnover during the day was Rs. 34866645.

Source : Equity Bulls

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