Persistent Systems shares rebound from 52-week low; brokerage sees 45% upside potential

Shares of Persistent Systems Ltd fell 1.29 per cent in Tuesday's trade to hit a fresh 52-week low of Rs 4,242.65. The stock later rebounded from the day's low and was last seen trading 0.79 per cent higher at Rs 4,332.

The recent weakness in the stock follows the company's announcement of its acquisition of Munich-headquartered digital engineering firm Nagarro. Persistent has agreed to acquire Nagarro for an enterprise value of EUR 1.27 billion.

"The transaction will be funded through debt of EUR 1.4 billion. Persistent has already secured an approximately 21 per cent stake in Nagarro through an agreement with its founding shareholder. The deal is structured as a voluntary public takeover, with a minimum acceptance threshold of 50 per cent plus one share," Axis Direct noted.

"The acquisition is expected to strengthen the company's presence in Europe while adding complementary industrial and consumer verticals to its existing portfolio. The transaction is expected to be completed by Q3 CY26/Q1 CY27," the domestic brokerage added.

"Persistent has delivered a Revenue/EBIT/PAT CAGR of 21 per cent/24 per cent/25 per cent over FY23–26, backed by strong execution capabilities, deal wins and strategic tech adoption. We believe the target valuation appears reasonable compared to global digital engineering peers, considering Nagarro's strong European franchise, diversified client base, and complementary capabilities in AI, SAP, and enterprise applications," Axis also said.

"The acquisition cost, however, could weigh on persistent earnings in the near term. Apart from revenue synergies, operational improvements and sustained client retention are expected to strengthen the company's operational performance in the longer run," it further stated.

Axis has retained its 'Buy' rating on Persistent, while keeping the target price unchanged. "Currently, the company is trading at 27x/23x P/E multiples of FY27E/FY28E. We value the company at 34x FY28E EPS and maintain our BUY rating on the stock with an unchanged TP of Rs 6,270/share," it stated.

The brokerage's target price implies a potential upside of 44.74 per cent from the stock's last checked price of Rs 4,332.

Separately, Nuvama Institutional Equities downgraded Persistent Systems to 'Hold', citing rich valuations. And, Elara Capital has maintained its 'Sell' rating on the stock.