Hold Persistent Systems, target price Rs 4500: ICICI Securities

ICICI Securities has hold call on Persistent Systems with a target price of Rs 4500. The current market price of Persistent Systems is Rs 4323.15. Time period given by analyst is one year when Persistent Systems Ltd. price can reach defined target.

Persistent Systems Ltd., incorporated in the year 1990, is a Mid Cap company (having a market cap of Rs 33358.75 Crore) operating in IT Software sector.

Persistent Systems Ltd. key Products/Revenue Segments include Software Services and Software Licence for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 1679.93 Crore, up 10.35 % from last quarter Total Income of Rs 1522.38 Crore and up 45.65 % from last year same quarter Total Income of Rs 1153.39 Crore. Company reported net profit after tax of Rs 200.99 Crore in latest quarter.

Investment Rationale
The brokerage is impressed with PSYS’ emphasis on growth priority. Company is poised to be the fastest-growth IT company under coverage in FY23E/FY24E. It builds-in revenue growth of 30.9%/18.4% with EBIT margins of 14%/14.5% for FY23E/FY24E. As it adjusts revenue, margin and ETR trajectories, EPS estimates for FY23E/FY24E remain largely unchanged. It believes street has adequately rewarded PSYS in the topmost valuation band among IT services – which leaves little room for disappointment. The stock is currently trading at a P/E 39x/32x on FY23E/FY24E EPS of Rs112/136. With consistent performance in terms of growth and steady margin expansion, it believes PSYS is a good turnaround story; however, valuations have already baked-in the performance. It values the stock at 33x FY24E EPS arriving at a target price of Rs4,500. HOLD.

Promoter/FII Holdings
Promoters held 31.26 per cent stake in the company as of 31-Mar-2022, while FIIs owned 20.03 per cent, DIIs 26.75 per cent.