The company saw a sharp margin improvement of 90bp on account of strong annuity-based (IP) revenues and SG&A optimization. The management was confident of achieving further improvement in margin, led by enhanced productivity, resulting from previous fresher and lateral hires.
As on December 2023, the order booking was at $521.4 million in total contract value (TCV) and at $392.1 million in annual contract value (ACV) terms. Deal win TCV was at a record high, aided by strong wins and renewals in North America.
Meanwhile, the board has declared an interim dividend of Rs 32 per share for FY24. The board has also recommended to split the face value of shares in the ratio of 1:2 i.e. from Rs 10 per share to Rs 5 per share.
The rationale behind stock split is to enhance the liquidity of the company’s equity shares and making it affordable to the investors.
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In past 6 months, the stock price of Persistent Systems has nearly zoomed 80 per cent. In comparison, the S&P BSE Sensex was up 8 per cent during the same period.
The company’s Q3 revenue growth was aided by IP seasonality and earlier deals ramp-ups in Healthcare; however, the healthy deal pipeline and strong conversion should lead to a balanced growth in Q4. Additionally, the insulated service mix and lower dependency on discretionary spends are also leading to strong renewals and conversion, unlike its peers.
The management was confident of delivering a top-quartile growth, while remaining cautiously positive on the macro outlook, the Motilal Oswal Financial Services said. The brokerage firm believes, the strong deal wins and continued momentum in its growth vectors are the strong foundations for FY25E/FY26E growth. We are building in USD revenue CAGR of 16 per cent over FY24E-FY26E.
While its peers have struggled to deliver positive growth and outlook, Persistent has maintained its growth momentum with sharp execution on margins during the quarter. The deal TCVs were strong in 3Q and it is building a strong foundation for growth in FY25/FY26. The company’s strong performance in recent years, healthy order book, and strong deal pipeline indicate an encouraging demand trend, the brokerage firm said. However, it maintains ‘neutral’ rating on the stock as MOFSL believe the positives have already been captured and the stock offers limited upside from its current levels.