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Persistent Systems (PSYS) - Analyst Meet Update - Dtd. - Dec. 17. 2012




Axis Capital Limited


17 Dec 2012





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We attended the annual analyst meet of Persistent. Key takeaways:  Persistent’s strong presence and domain expertise in high-spend technology areas of Cloud, Mobility, Analytics and Enterprise Collaboration (~40% of revenue) will continue to drive higher than industry average growth in FY14E  Investments in front-end and presence across ecosystem (products - full product lifecycle, clients – large ISVs /innovative technology start-ups) are paying off – deal pipeline stronger vs. start of the year  Higher revenue visibility in IP (20% revenue share), its key differentiator vs. peers, is led by pick up in deal wins in FY13E (IP revenue at USD 43 mn vs. USD 19 mn in FY12). Growth in FY14E IP revenue would continue to be stronger (30%) than company average (18%).  Sell-with partnership with key clients/Systems Integrators like IBM, Salesforce.com, Samsung, Microsoft etc is yielding results. The strategy is enabling new enterprise client wins, wider ecosystem reach, traction in professional services, and quicker/ efficient execution We remain confident of FY14E USD revenue growth of 18% (16% in FY13E) and INR EPS of ~Rs 55 (on higher INR of Rs 53 vs. Rs 50.4 earlier). Raise target PE to 10x (from 9x earlier) to factor in higher visibility in IP revenue. Maintain BUY with revised TP of Rs 550 (Rs 475 earlier), which implies an upside of 14% from CMP. Key risk: Higher volatility in IP-led business At CMP of Rs 482, the stock trades at 10x FY13E EPS of Rs 47 and 9x FY14E EPS of Rs 55 (Rs 53 earlier) Regards, Priya Rohira (Executive Director – IT & Telecom) Institutional Equity Research Axis Capital Ltd. Tel.: + 91 22 4325 1104

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