Persistent Systems Q2 earnings: IT firm 'on-track to deliver industry leading growth', stock hits record high  

Shares of mid-tier IT services company Persistent Systems Ltd hit a record high on Wednesday after the firm reported a stellar set of Q2 earnings. Persistent Systems shares rose 11.78 percent to Rs 5764 on Wednesday against the previous close of Rs 5156.40 on BSE. Market cap of the firm rose to Rs 89,106 crore. The stock opened higher at Rs 5259.55. It has climbed 212% in two years and gained 1794% in five years.

Total 0.68 lakh shares of the firm changed hands amounting to a turnover of Rs 38.27 crore on BSE.    

The stock has a beta of 0.9, indicating low volatility in a year.

The company reported a 23.4% year-on-year (YoY) rise in net profit at Rs 325 crore in Q2 against a net profit of Rs 263 crore in Q2 of the previous fiscal. Revenue from operations climbed 20.1% to Rs 2,897 crore in the last quarter against Rs 2,412 crore in the year-ago period.

Earnings before interest and taxes (EBIT) rose 5.8% quarter-on-quarter (QoQ) to Rs 406.2 crore from Rs 384 crore.

Prabhudas Lilladher recommended an accumulate rating on Persistent Systems with a target price of Rs 5810. 

"Persistent Systems reported strong growth in Q2FY25, with revenue of US$345 million, up 5.1% QoQ in CC and 5.3% QoQ in USD terms, exceeding our estimate of 2.9% QoQ CC growth and consensus estimate of 3.9% QoQ USD growth. BFS and Healthcare segments drove growth despite ongoing weakness in Hitech sector. 

We estimate USD revenues/earnings CAGR of 18%/22% over FY24-FY27E. The stock is currently trading at 38x FY27E, we are assigning P/E of 43x to FY27E with a target price of INR 5,810. We maintain ACCUMULATE," said Prabhudas Lilladher. 

Axis Securities has assigned a buy call with a price target of Rs 5775 against the earlier target of Rs 5,130 per share.  

"The management has indicated strong, broad-based growth across verticals, backed by a robust deal pipeline and better engagement with clients.

• TCV stood strong in Q2FY25 with deal wins at $529 Mn, of which $310.8 Mn are new deal wins.

• The management is confident of gaining medium-term demand momentum against the backdrop of the deals it has won in previous quarters. It also expects margins to remain at the same levels. 

Given the company’s strong growth potential backed by robust deal wins and superior execution capabilities, we recommend a BUY rating on the stock," said Axis Securities.

ICICI Securities said the firm was on-track to deliver industry leading growth. 

Persistent Systems reported a strong quarter on all fronts – 1) revenue; 2) deal TCV; and 3) margins, said the brokerage. 

Howeveer, key risks to the brokerage's target are 

1) Continued weakness in its largest vertical – Hi-tech. Growth momentum slowing down 

2) targeted margin uptick taking longer than anticipated.

"We largely maintain our FY26–27E EPS and increase our FY25 estimate by 3%, factoring in the beat in Q2. We continue to value the stock at 51x on Q2FY26E to Q1FY27E EPS of Rs 121 to arrive at a target price of Rs 6,140 with a potential upside of 19%," said ICICI Securities. 

Brokerage Motilal Oswal sees a 22% upside in the IT stock post September quarter earnings.

"We project a 19% USD revenue CAGR over FY24-27E for PSYS, which, combined with margin expansion, could result in a 21%+ EPS CAGR. This positions PSYS in a league of its own as a diversified product engineering and IT services player, justifying a premium valuation multiple. Our estimates are largely unchanged. 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 50 times Sep’26E EPS. Reiterate BUY with a price target of Rs 6,300," said Motilal Oswal.