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Persistent
Analyst Meet Update
We attended the annual investor meet of Persistent Systems (Persistent). We remain positive on the prospects of the company as it is well positioned to benefit from the next technology wave focused on cloud, mobility, analytics and collaboration. Following are the key takeaways of the meet: Focus on emerging areas cloud, mobility, collaboration and analytics: According to Persistent, cloud, mobility, collaboration and analytics will drive growth going ahead and will become an integral part of enterprise technology spending. Persistent currently derives ~40% of its revenues from these areas (each area contributes ~10% to its revenue). The company has been focusing and investing in these areas, which are an integral part of its 4x4x4 growth strategy (services 4 verticals banking and finance, infrastructure and systems, lifesciences and telecom in 4 technology areas cloud, mobility, collaboration and analytics using 4 services IP, consulting, PES and sell-with partners). The management expects mainstream deployment of cloud computing to increase from H2CY2013. IP led revenues: Persistent has been growing its IP led revenues since the past couple of quarters and is focused in building its IP-led services portfolio through organic as well as inorganic moves. The company is targeting to draw ~20% of its total revenue from IP services as against 18% in 2QFY2013 and 14% in 1QFY2013. IP led revenues have lower margins in the initial phase due to R&D costs involved in them but the company is confident of margin expansion going forward. Sell-with partnerships: The company has sell-with relationships with companies such as IBM, Microsoft, Salesforce.com, Cisco, Samsung, etc. which is yielding results. This strategy is enabling new enterprise client wins, wider ecosystem reach and quicker/efficient execution. Outlook and valuation: Persistents management sounded confident of the companys growth exceeding Nasscoms estimate of 11-14% yoy in FY2013, despite challenging macros, citing that the deal pipeline has increased by 20-25% as compared to that in the previous quarter. Over FY2012-14E, the company is expected to record USD and INR revenue CAGR of 13.9% and 18.2%, respectively. The stock is currently trading at 10.2x and 9.1x its FY2013E and FY2014E EPS of `48.0 and `53.9, respectively. We continue to remain positive on the stock and maintain Accumulate rating on it with a target price of `540.
ACCUMULATE
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code IT 1,964 (308) 0.9 515/298 129,485 10 19,476 5,930 PERS.BO PSYS@IN
`491 `540
12 Months
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 39.0 32.1 2.6 26.4
3m 6.1 20.0
3yr 16.5 -*
Ankita Somani
+91 22 39357800 Ext: 6819 ankita.somani@angelbroking.com
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Persistent No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
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