Persistent Systems gains on strong Q3 show, Macquarie sees 105% upside

The midcap IIT firm’s revenue grew 5.9 percent quarter-on-quarter to Rs 2,169.4 crore and dollar revenue rose 3.4 percent to $264.35 million in the October-December period

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The share price of midcap IT firm Persistent Systems gained over 3 percent in the morning trade on January 19 after the company registered an 8.2 percent sequential growth in profit at Rs 238 crore for the quarter ended December 31, 2022.

Revenue grew 5.9 percent quarter-on-quarter (QoQ) to Rs 2,169.4 crore and dollar revenue rose 3.4 percent to $264.35 million. The IT company also announced an interim dividend of Rs 28 a share for FY23.

At 9.30 am, the stock was quoting at Rs 4094 apiece on the National Stock Exchange, up 3.4 percent. In the past six months, it has gained over 23 percent.

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At the operating level, the company’s EBITDA (earnings before interest, taxes, depreciation and amortisation) increased by 9.1 percent QoQ to Rs 401.55 crore. On a year-on-year basis, both net profit and revenue grew over 30 percent.

“This is the 11th sequential quarter of revenue growth, fueled by continued investments in innovative technologies and our differentiated digital engineering expertise. We won several large deals across industries and service lines, driving 20 percent sequential growth in total contract value (TCV) bookings,” Sandeep Kalra, Chief Executive Officer and Executive Director, Persistent Systems, said.

The order booking for the quarter ended stood at $440.2 million in TCV.

EBITDA margin at 18.5 percent was also above analyst estimates. Domestic brokerage Motilal Oswal Financial Services said it was 60 basis points above its forecast. The firm has a “neutral” rating on the stock.

“Persistent System’s growth was led by software and hi-tech, up 4.1 percent QoQ. Growth in Europe was strong at 12.2 percent QoQ, while North America posted weak growth of ~1.5 percent QoQ,” it said.

In a note released on January 13, foreign brokerage firm Macquarie picked Persistent Systems as its top midcap IT stock, with a target price of Rs 8,330, indicating a 105 percent upside. “We see broad-based growth drivers that have helped deliver superior growth despite a drag from top five clients,” it said.

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