Persistent growth momentum to continue as JM Financial sees 13% upside potential

Investors have only little doubt on Persistent System’s (PSYS) growth momentum, a sentiment which is also echoed by domestic brokerage firm JM Financial as they have a target price of Rs 6,030 on the stock, signaling an upside potential of 13.4%.

The strength of PSYS’ recent deal wins is so robust that simply maintaining current Annual Contract Value (ACV) and leakage levels would enable the company to meet the FY25E USD revenue target (+17%).

“Our recent interaction with the company, on the contrary, suggests revenue as well as booking momentum has continued into Q2. Leakages have stabilised as well. That should start to flow into FY26 revenue visibility, further undergirding investor confidence,” said JM Financial in its report.

JM Financial expects PSYS to exit FY25 at 15.5% EBIT margin. Growth, SG&A leverage and maturity-profile of deals are medium-term levers, building these in their assumptions driving 1-5% upgrade to our FY25-27E EPS.

“We build these in our assumptions driving 1-5% upgrade to our FY25-27E EPS. PSYS’ strength in data systems, product engineering and ecosystem partnerships (Hyperscalers, data platforms) position it relatively upstream compared to traditional IT Services players in the GenAI value chain,” analysts at JM Financial said.

Investors however, fret over sustainability of PSYS’ margins as a one-off nature of margin benefits in 4Q/1Q does raise doubts.Also read: Tata Motors shares plunge 6% on weak growth outlook, UBS downgradeOn the contrary, the domestic brokerage firm believes that they see sufficient near/medium-term margin levers at PSYS’ disposal. The company has reversed only a third of potential earn-outs attributable to the under-performing entities. Incremental reversal should support Q2 margins, offsetting wage hike impact to some extent.

The shares of Persistent Systems closed 0.80% higher at Rs 5,315.50 on BSE on Wednesday.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)