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Emkay Global
Persistent Systems (Buy)
Target: ₹3,700
CMP: ₹3,539.35
Persistent Systems has seen a 5.6 per cent CQGR in services revenue since Q1-FY20, despite Covid-19 disruptions. It indicates healthy demand for the company's offerings and early results of leadership augmentation, recalibrated sales incentive structure and strong execution.
The company sees healthy demand across verticals and service lines and expects demand to remain strong over the next 3-5 years. The company has set up a large deal unit and invested in sales, delivery and solution capabilities to drive large multi-year annuity deals. It is focusing on structurally improving revenue per client, sales spend per client and proactive proposals.
It is confident of sustaining the revenue growth momentum on the back of broad-based demand, robust deal intake, healthy deal pipeline and new logo additions.
The company is focusing on increasing the share of revenues from the Europe region in the next few years, organically and inorganically. It expects revenues from Europe to rise to 15-18 per cent of total revenue in the next 3-5 years from 9.5 per cent currently. Among our coverage companies, we expect Persistent Systems to lead the pack in terms of organic revenue growth. A strong earnings trajectory (27.4 per cent EPS CAGR over FY21-24) and healthy cash generation should help to sustain higher valuations.
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