Investor's Eye: Update - Persistent Systems (Ahead of the pack; maintain Buy with price target of Rs1,275)

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Investor's Eye [March 05, 2014]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Persistent Systems Recommendation: Buy Price target: Rs1,275 Current market price: Rs1,124 Ahead of the pack; maintain Buy with price target of Rs1,275 Key points In our recent interaction, the management of PSL reaffirmed the confidence of exceeding the industry growth rates and posting a revenue (in dollar terms) growth of over 15% in FY2015 (comfortably higher than the range of 13-15% guidance given by NASSCOM for the Indian IT services sector). The confidence is backed by a strong visibility of growth in the SMAC space and expects the proportion of revenues from this fast growing market segment to contribute to close to 70-75% of its revenues from the current levels of 50% in the next three to four years. The margin is expected to remain stable in the healthy range of 25-26% (the highest among mid-cap companies) with the rupee remaining at current levels. Post the management interaction, we have increased our earnings estimates for FY2015 and FY2016 by 3.5% and 6.5% respectively. We believe that PSL deserves premium valuations owing to the higher than industry growth rates, strong positioning in a fast growing niche space and superior management quality. Consequently, we retain our Buy rating on the stock with a price target of Rs1,275. For an investment horizon of two to three years, PSL is a must have stock in one's portfolio with a potential to double investment returns. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards, The Sharekhan Research Team

 

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