PINC Research is bullish on Persistent Systems and has recommended buy rating on the stock with a target of Rs 384 in its October 18, 2011 research report.
“Persistent’s Q2 revenue of USD51.5mn (3.1%QoQ growth) was below expectation (PINCe USD53.5mn). EBITDA margin expanded 112bpsQoQ to 19% due to rupee depreciation & higher non-linear revenues. PAT increased 17.6%QoQ due to lower effective tax rate. EPS was Rs8.1.”
“Revenue grew 3.1%QoQ to Rs2,382mn below our expectation (PINCe Rs2,450mn). There was decline in linear pricing but rupee depreciation and higher non-linear revenues boosted the EBITDA margins to 19% (+112bps QoQ). Lower effective tax rate (28.2%) compared to 31.1% in Q1 caused PAT to increase by 17.6%QoQ to Rs324mn. For consecutive quarter North America (82% contribution) had a muted growth (2.1%QoQ). Europe and India & APAC grew 8.6%QoQ and 7.3%QoQ, respectively, on a small base. Growth was led by top client (9.2%QoQ). Top 10 clients grew 5.6%QoQ against 0.7% QoQ growth for non-top 10 clients. Life Sciences & Healthcare (10.6% contribution) grew 10.3%QoQ. Telecom & Wireless and Infrastructure & Systems had slower growth rate at 2.1%QoQ and 2.3%QoQ respectively.”
“The management has not revised its guidance but it is unlikely to achieve revenue of USD220mn in FY12 as it requires 10%QoQ CQGR in Q3-Q4. We have revised the volume estimates downwards but changed our currency estimates to 47 for FY12 and 46.5 for FY13 along with expectation of higher non-linear revenues which will result in better profitability. The stock currently trades at PER multiple of 9.6x and 9.1x FY12E and FY13E EPS. Maintain ‘BUY’ recommendation on the stock with a target price of Rs384 based on 11x FY13E earnings,” says PINC Research report.
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