Persistent Systems shares slip after nine days; here's why

Shares of Persistent Systems fell after nine days of gain today after JPMorgan downgraded the stock to neutral with a target price of Rs 4,100. The downgrade in the stock comes after a 31% rally since upgrade by the brokerage to overweight in early October. Since then, the Nifty IT has gained 14%.

Persistent Systems shares touched an intraday low of Rs 4,220.8, down 2.86% on BSE. Stock of Persistent Systems stock was trading higher than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages. The stock has lost 2.16% in a year and fallen 13.39% in 2022. However, in a month, the stock has zoomed 14.75%.

Total 4,350 shares of the firm changed hands amounting to a turnover of Rs 1.85 crore in the morning session. Market cap of the firm fell to Rs 32,447 crore on BSE.

The stock hit a 52-week high of Rs 4,986.85 January 3, 2022 and a 52-week low of Rs 3,091.65 on September 26, 2022 on BSE.

JPMorgan said shares of Persistent Systems are now trading at a premium to global peers EPAM, Endava & Globant despite similar earnings growth expectations. "We don't see any positive catalyst that can drive a further re-rating," it said.

The brokerage is of the view that the stock is fairly valued now at 32 times 1 year fwd PE with a reverse discounted cash flow (DCF) implying 17% CAGR growth for next 10 years.

Also Read: Persistent Systems stock rises 4% post Q2 earnings

In the second quarter of the current fiscal, the IT solution provider's net profit climbed 4% to Rs 220.01 crore on 9.1% increase in revenue to Rs 2048.64 crore in Q2 September 2022 over Q1 June 2022.

On a year-on-year basis, Persistent Systems' consolidated net profit climbed 36% and revenue rose 51.6% in Q2 September 2022 over Q2 September 2021.

The company's EBITDA stood at Rs 367.96 crore during the quarter, up 10.4% quarter-on-quarter (QoQ) and up 64% year-on-year (YoY). EBITDA margin stood at 18% in Q2 FY23. Profit before tax came at Rs 295.60 crore in Q2, up 4.9% QoQ and climbing 35.8% YoY.

Persistent Systems is engaged in the business of providing software products and technology services. The company provides a range of services, including digital strategy and design, software product engineering, client experiences (CX) transformation, cloud & infrastructure, intelligent automation, enterprise information technology (IT) security and data and analytics.