scorecardresearch

Rs 524 to Rs 2,515: This IT stock rallied 379% in 12 months

The midcap IT share has delivered more than 300 per cent returns to its shareholders in the last 12 months. The share stood at Rs 524.15 on May 26, 2020. It has zoomed to Rs 2,515.55 today, translating into gains of 379 per cent during the period. 

Representative Image Representative Image

Share of Persistent Systems rose 5 per cent to hit a 52-week high of Rs 2,515.55 in today's intraday session on BSE.

The midcap IT share has delivered more than 300 per cent returns to its shareholders in the last 12 months. The share stood at Rs 524.15 on May 26, 2020. It has zoomed to Rs 2,515.55 today, translating into gains of 379 per cent during the period. In comparison, Sensex clocked 65 per cent in one year.  

The stock ended 3.16 per cent higher at Rs 2502.75 against previous close of Rs 2426.15 on BSE. It has gained 65 per cent since the beginning of this year. Persistent share stands higher than 5 day, 10 day, 20 day, 50 day, 100 day, and 200-day moving averages. Market cap of the firm rose to Rs 19,127.27 crore.

"Persistent has not only reported excellent performance in 4QFY21 (+4.6% QoQ USD) but also shown strong consistent revenue growth (+12.8% YoY USD) and margin expansion (+290 bps) throughout the year," Prabhudas Lilladher said in a report.

"There is further scope for expansion in margins led by cost optimization and revenue acceleration. We believe that strong revenue growth momentum can sustain given management's confidence to win $200-250 million TCV each quarter, strong deal pipeline, improvement in the growth trajectory of Alliance business, broad-based growth across all three verticals, and expansion of presence in Europe.

Motilal Oswal has a 'Buy' call with a target price of Rs 2,340 per share. The brokerage firm noted that a pickup in Alliance business should help Persistent System deliver 18.6% USD revenue growth in FY22E, despite a higher FY21 base effect (12.9% YoY).

"Persistent Systems has reported best-in-class growth in the Technology Services Unit (TSU) business (18.4% YoY) in FY21, despite an industry-wide impact from COVID-19 in 1H. With a strong demand commentary and deal momentum, we expect it to continue to deliver top-tier IT Services revenue growth among our midcap IT coverage. We upgrade our FY22E/FY23E EPS estimate by 7%/9% as we gain further confidence on growth and margin momentum," it added.

ICICI Direct believes Persistent will be a key beneficiary of secular growth in technology mainly led by its digital prowess and partnership with Red Hat, Salesforce & other hyperscalers. It also noted that Persistent has many levers like utilisation, lower amortisation cost, higher utilisation, and improving revenue growth to not only offset the margin pressure but improve margins.

"This coupled with increasing large deal size, focus on client mining, new client addition and acceleration in European revenues bode well for long term revenue growth. Hence, we maintain 'Buy' on the company with a revised target price of Rs 2,385 (25x PE on FY23E EPS)," the brokerage firm added.

The Pune-headquartered company reported a profit of Rs 138 crore for the quarter ended March 31, 2021, up 64 per cent while revenues increased by 20 per cent to Rs 1,113.35 crore. In dollar terms, revenues were up 20 per cent at $152.82 million.

"We are happy to conclude FY21 on a high note, with double digit growth in both our revenue and EPS. Our performance demonstrates the alignment between Persistent's core strengths in digital engineering and our clients' needs as they accelerate to the next wave of transformation. We are confident that efforts to strengthen our leadership team, partner ecosystem, and operational excellence will continue to be the foundation of our success. The Persistent Foundation continues to contribute towards COVID relief efforts globally and we continue to support our employees during these challenging times," said Sandeep Kalra, Executive Director and Chief Executive Officer, Persistent Systems.

Recently, the company also entered into an agreement with M/s. Sureline Systems Inc. and it's subsidiary Sureline Systems India Private Limited (together 'Sureline Systems') for acquisition of selected contracts, IP, employees, and assets used in the business from Sureline Systems.