Persistent Systems’ strong deal wins boost outlook, acquisition costs pose risk
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Listen to this article in summarized format Persistent Systems reported a strong 3.8% sequential revenue growth for the June quarter, largely led by a 22% increase in India business while the US, its largest market, grew by a modest 0.8%. The growth in India seems more like an aberration, driven by a few clients that procured services through the global capability centres (GCC) in the country. Therefore, the outlook for rest of the fiscal year depends on the recovery in the US market. The operating margin (EBIT margin) contracted by 30 basis points sequentially to 16% amid a 150 basis point fall in employee utilisation at 86.5% as the company hired employees to ramp up the large project. The staff strength increased to 28,640 from 27,502 a quarter ago. The wage increase undertaken at the beginning of the September quarter is likely to pull down the margin by 180-200 basis points, which may be mitigated to some extent through improved utilisation amid the ramp up of new projects. Read more: Global Market Today: Asian shares slip as US stock futures dip ahead of Warsh’s Jackson Hole speech Despite the recovery since the end of June, the stock price is still 10% lower on year-to -date (YTD) basis though it remains in a relatively better position compared with a 20% drop in the BSE Infotech index. It is likely to stay range-bound in the short term depending on the actual impact of the funding of Nagarro's acquisition on the financials. For the long-term, analysts have raised the valuation multiples amid higher new deal momentum. JM Financials has raised the FY28 expected price-earnings (P/E) multiple to 34 from 28, resulting in a higher target price o ₹5,870 compared with ₹4,755 earlier. The stock ended Thursday's session at ₹5,647 on the BSE. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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