Shares of Persistent Systems Ltd trades at expensive valuations, but following the IT firm's Q3 results, a few brokerages maintained their 'Buy' calls on the stock, with target prices suggesting up to 35 per cent potential upside on the counter. The IT firm is on track for $2 billion in revenues by FY27, but margins are a risk, analysts said.
MOFSL said its estimates are largely unchanged post Q3 results.
"The stock is currently trading at an admittedly expensive valuation. That said, owing to its superior earnings growth trajectory, on a PEG basis, we believe the valuation still has room for upside. We value Persistent Systems at 55 times FY27 EPS. Reiterate BUY with a target price of Rs 7,600," MOFSL said.
Despite healthy 3 per cent headcount addition, utilisation stands at 87 per cent and key margin levers are now maxed out.
MOFSL estimated only a modest margin expansion of 50 bps over FY26 despite the management reiterating its target of 200 300 bps margin expansion over the medium term.
Nuvama said Q3 revenue for Persistent Systems came in at $360 million, up 4.3 per cent, beating Street’s estimate of 4 per cent QoQ. EBIT margin expanded 90 bps QoQ to 14.9 per cent, boosted by a provision reversal, still in-line estimate of 14.6 per cent. TCV too, was strong at $594 million, up 14 per cent YoY.
"Persistent delivered another quarter of strong growth with incremental recovery in ‘core’ margins. Management guided for growth to remain strong, despite lower ACV growth. We rollover to 50 times FY27 PE, yielding a target price of Rs 7,000 (earlier Rs 6,350); maintain Buy," it said.
Nirmal Bang said the ongoing investments in AI, cloud, and digital transformation services reinforce Persistent Systems' competitive edge in the IT services space.
"We remain optimistic about Persistent Systems growth trajectory, given its consistently robust financial performance, strong deal wins, pricing premium over peers and strategic focus on AI and platform-driven services. Post the strong 3Q performance and solid FY31 aim for $5 billion in revenue, we upgrade the stock to ‘BUY’ with an increased target of Rs 6,661 (vs earlier Rs 5,896)," Nirmal Bang said.