Persistent Systems Q1 FY24 results preview: Here's what brokerages say

Persistent Systems is scheduled to announce its earnings for the quarter ended on June 30, 2023 on Thursday and the stock was trading lower ahead of its Q1 earnings. The midcap IT company continues to be brokerage's top midcap pick and is likely to report a decent performance in the Q1FY24.

Brokerage firms tracking the stock expect the company to clock a revenue around Rs 2,300-2,400 crore, slightly higher on sequential (QoQ) basis but a double-digit growth on a year-on-year (YoY) basis. Profit is seen flat on QoQ basis but a decent growth on an annual comparison. EBIT margins may improve more than 100 basis points (bps) YoY with EBIT close to Rs 300 crore.

Analysts expect management commentary after the results to be the key factor for the company. FY24 growth outlook, M&A update, EBIT margins outlook, top client’s performance, deal win and pipeline commentary and IP business outlook will be the main watchable, they said.

Phillip Capital expects Persistent Systems to report a revenue at Rs 2,326.8 crore, rising 24 per cent YoY and up 3 per cent QoQ, with its EBIT at 362.3 crore, surging 35 per cent YoY and EBIT margins at 15.6 per cent, flat QoQ but up 130 bps on yearly comparison. PAT is penciled around Rs 261.5 crore, up 26 per cent YoY and 4 per cent sequentially.

"We expect CC revenue growth to be weaker than earlier quarters on account of likely project ramp downs in BFSI and healthcare verticals. Hitech is expected to remain steady. Margins are expected to marginally expand," it added. The brokerage has a buy rating with a target price of Rs 5,690 on Persistent, which continues to be among its top picks from midcap IT space.

Antique Stock Broking has penciled its revenue at Rs 2,324.3 crore, up 24 per cent YoY and 3 per cent QoQ, with EBIT is seen at Rs 360.6 crore, up 34 per cent YoY and EBIT margins are likely to improve 120 bps YoY to 15.5 per cent. PAT is likely to be around Fs 238.5 crore, up 13 per cent YoY but degrowing 5 per cent sequentially.

"We expect revenue growth of 3.0 per cent QoQ in dollar terms, the best among peers, but the lowest in the past 14 quarters impacted by ramp-down in BFSI and HC. Expect margin to remain flat on QoQ basis but expect net profit margin to contract by 180 bps on one-time expenses related to celebrations on achieving the $1 billion mark," said Antique.

Shares of Persistent Systems dropped about 2 per cent to Rs 5036.45 on Thursday, with its market capitalization falling below 40,000 crore mark. The scrip had settled at Rs 5,139.15 on Wednesday.

HDFC Securities pegs net sales at Rs 2,329 crore, up 24 per cent YoY and 3 per cent QoQ. EBIT is seen at Rs 359 crore, up 34 per cent YoY while margins are likely to 15.4 per cent, improving 111 bps. Adjusted PAT is seen at Rs 277 crore, 10 per cent QoQ and 31 per cent YoY.

Higher discretionary and consulting segments impact the soft demand environment, said HDFC Securities, which prefers Persistent Systems from mid-tier IT.  The brokerage has a buy rating on the stock with a target price of Rs 6,410.

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