Brokerages have issued mixed recommendations on Persistent Systems following its Q3 performance. While the company reported decent results with in-line revenue and better-than-expected margins, elevated valuations and ambitious growth targets have sparked varied opinions. Here’s what top brokerages are saying:
Citi: Bearish with Sell Call, Target ₹5,000
Citi maintained its ‘Sell’ rating but raised the target price to ₹5,000, citing concerns over Persistent’s lofty valuations at 51x FY26 EPS.
- Highlights: Revenue met expectations, margins exceeded, and utilization reached its highest-ever levels.
- EPS estimates for FY25/FY26 were revised upward by 2-6%, but Citi believes the positives are already priced in.
HSBC: Cautious with Hold Call, Target ₹5,650
HSBC retained its ‘Hold’ rating, setting a target price of ₹5,650.
- Positives: Persistent is successfully diversifying beyond healthcare verticals, positioning itself for industry-leading growth in FY26.
- Concerns: Consensus already factors in expected growth and margin improvement, leaving little room for upside.
Nomura: Neutral Call, Target ₹6,200
Nomura issued a ‘Neutral’ rating, highlighting the company’s strong execution.
- Positives: Q3 revenue was in line, while margin improvement provided additional comfort.
- Nomura believes strong deal wins and execution will help Persistent deliver growth in line with industry leaders.
JPMorgan: Overweight, Target ₹7,200
JPMorgan remained bullish with an ‘Overweight’ rating, raising the target price to ₹7,200, reflecting a 27% upside.
- Key Takeaways: Revenue grew 4.6% QoQ in constant currency terms, while EBIT margins expanded by 90 bps QoQ to 14.9%.
- The company’s ambitious target of $5 billion revenue by FY31 and margin expansion plans of 200-300 bps over 2-3 years are seen as achievable.
Kotak Institutional Equities: Bearish with Sell Call, Target ₹5,000
Kotak maintained its ‘Sell’ rating, citing downside risks to Persistent’s ambitious plans.
- Observations: While Q3 was in line with growth and margin estimates, Kotak expressed concerns over the feasibility of achieving $5 billion in revenue by FY31 and significant margin expansion by FY27.
Conclusion: Mixed Sentiment Among Brokerages
Brokerages remain divided on Persistent Systems, with target prices ranging from ₹5,000 (Citi and Kotak) to ₹7,200 (JPMorgan). While strong execution, improved margins, and growth aspirations are viewed positively, elevated valuations and ambitious targets temper optimism.
Persistent’s current market price of ₹5,655 leaves potential for upside of up to 27%, as per JPMorgan, while Citi and Kotak see downside risks.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.