Persistent Systems Gains Traction on Buy Call, Rs 7,360 Target Set

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AuthorAarav Shah|Published at:
Persistent Systems Gains Traction on Buy Call, Rs 7,360 Target Set
Overview

Prabhudas Lilladher initiated a BUY recommendation for Persistent Systems, setting a target price of Rs 7,360. The brokerage cited strong revenue performance, exceeding estimates by a wide margin. Growth prospects are bolstered by the company's deep involvement in data and AI-driven product engineering, alongside early investments in intellectual property and platforms like Sasva, which are enhancing productivity. Management maintains ambitious long-term revenue goals.

Prabhudas Lilladher has reiterated its BUY rating on Persistent Systems, establishing a firm target price of INR 7,360.
The IT services firm posted a sequential revenue growth of 4.1% in constant currency, surpassing analyst expectations of 3.2%.

Robust Q3 Performance

This outperformance is underpinned by broad-based expansion across its verticals and a strategic focus on complex data and AI-led product engineering, areas that promise significant future growth opportunities.

Strategic Growth Drivers

The company's visibility for future revenue, measured by Annual Contract Value (ACV), looks robust. For the nine months ending FY26, the ACV stands at USD 722 million, an 18% year-on-year increase, with new business ACV also up 18% YoY at USD 256 million.

Persistent Systems' early investments in proprietary intellectual property and accelerators are yielding tangible results. Platforms such as Sasva, an AI-powered solution, are instrumental in optimizing project cycles and translating productivity gains into client benefits.

Management has reaffirmed its commitment to ambitious revenue milestones, aspiring to reach USD 2 billion by fiscal year 2027 and USD 5 billion by fiscal year 2030.

Enhanced Profitability Outlook

Despite facing an approximate 180 basis points impact from wage hikes in the third quarter, the company managed to absorb this pressure. This was achieved through a significant IP-led deal that allowed for upfront revenue recognition, thereby shielding margins.

Looking ahead, Prabhudas Lilladher has largely maintained its revenue growth estimates for FY27E and FY28E at 17.9% and 18.9% respectively, while revising margin projections upwards by 60 basis points for both years. The target price of INR 7,360 is derived from applying a multiple of 40 times the estimated Earnings Per Share (EPS) for FY28E.

This valuation reflects confidence in the company's sustained growth trajectory and its ability to leverage cutting-edge technologies.

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