Brokerage firm Citi initiated its coverage on the IT company Persistent Systems and maintained a ‘sell’ rating on the stock. Citi has set a target price of Rs 3,790 per share on Persistent Systems, indicating a downside of 36.2 percent from Thursday’s closing price on BSE.
The management does not witness any meaningful change in the demand environment or client conversion compared to the start of the quarter. The process of decision-making has been slow, but there is no delay in the ramp-up of deals, Persistent Systems said at its management call.
It believes that the Banking, Financial Services and Insurance (BFSI) sector is relatively more challenged compared to other verticals. On the other hand, the technology segment appears healthy with a decent pipeline. Further, the healthcare segment is expected to return to growth over the next few quarters.
The mid-tier IT company Persistent Systems Ltd continues to focus on deal closures, chasing deals and investing in its sales team.
The IT major’s Earnings before interest and taxes (EBIT) margins for the financial year 2024 (FY24) are expected to remain at similar levels compared to the preceding fiscal year 2023.
Persistent has conducted regular wage growth in the second quarter, which shall be recouped through cost optimisation or operational efficiencies in the remaining quarters of FY24.
As per the medium-term outlook, the company’s mergers and acquisitions (M&A) are likely to continue filling the company’s capability or geo gaps, especially in the areas of data and security focusing on consumer, media and telecom verticals, along with its presence in Europe.
Persistent Systems aims to become a $2 billion revenue company by the financial year 2027 (FY27), which would include M&A worth approximately $150 million in the early stage, later making it a part of its organic growth journey going forward.
The company’s management aspires to improve its EBIT margins by nearly 200 basis points (bps) by FY27 from the current levels in FY23.
Citi sees Persistent Systems’ valuations at almost 35 times the 1-year forward consensus earnings per share (EPS) and at nearly 50 percent to NSE IT, which is close to highs.
Shares of Persistent Systems were trading at Rs 5,928.85 apiece, down 0.15 percent, on BSE at 12:18 PM.
(Edited by : Asmita Pant)
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