Persistent Systems hits 9-month high; rallies 15% in 3 days post Q3 results

The company's strong performance in recent years, healthy order book, and strong deal pipeline indicate an encouraging demand trend, said Motilal Oswal

Shares of Persistent Systems continued their northward movement for the third session to hit a nine-month high of Rs 4,540 on surging 5 per cent on the BSE in Monday’s intra-day trade.

The stock of the information technology (IT) company was trading at its highest level since April 11, 2022. It hit a 52-week high of Rs 4,950.35 on April 5.

Persistent Systems has rallied 15 per cent in the last three sessions after the company said it won several large deals across industries and service lines, driving 20 per cent sequential growth in total contract value (TCV) bookings in the October-December quarter (Q3FY23).

The company reported a 6 per cent sequential increase in revenues at Rs 2,169.37 crore for Q3FY23, meeting Street estimates. This was also its 11th sequential quarter of revenue growth.

Its earnings before interest and tax (Ebit) was up 11.57 per cent at Rs 333.21 crore, while margin expanded to 15.36 per cent. Net profit grew 8.15 per cent quarter-on-quarter (QoQ) at Rs 237.95 crore in Q3FY23. The board approved an interim dividend of Rs 28 per share.

The company reported QoQ constant currency (CC) growth of 3.5 per cent for the quarter. In dollar terms, the company reported revenue of $264.4 million, up 3.5 per cent QoQ. Geography wise, North America (77.1 per cent of mix) reported muted growth of 1.5 per cent QoQ while Europe & India reported a growth of 12.2 per cent & 10.7 per cent respectively.

The order booking for the quarter was at $440.2 million in TCV and at $326.3 million in Annual Contract Value (ACV) terms.

Strong deal pipeline, traction in cost-take-out deals and likely bounce back in top client growth should cushion any moderation in discretionary spends. Motilal Oswal Financial Services (MOFSL) expect Persistent Systems to deliver a top tier revenue growth among midcap IT coverage universe (21 per cent CAGR over FY22-25E).

Historically, execution challenges and volatility in the IP portfolio led to inconsistency in Persistent Systems’ performance. However, the brokerage said it has noticed steady progress on the execution front after the changes in management and strategy.

This is evident from the services segment’s healthy and industry-leading performance over the past few quarters. MOFSL expects a higher emphasis on annuity revenue to address the inconsistency issue to some extent.

"The company’s strong performance in recent years, healthy order book, and strong deal pipeline indicate an encouraging demand trend," it said in a result update.