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- 23 Jan 2024
- ICICI Securities
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MARGIN EXPANSION BY 200-300 BPS BY FY27E
PERSISTENT - 6107 Change: 208.00 (3.53 %)News: Persistent Systems reported steady growth in Q3 by reporting a revenue growth of 3.1% QoQ in CC terms while in dollar terms it grew by 3% QoQ to US$ 300.6 mn. In Rupee terms the company reported a revenue of Rs. 2,498.2 crore, up 3.6% QoQ. Vertical wise the growth was aided by Healthcare segment (21.8% of mix) which grew by 16.4% QoQ while Hi-Tech & BFSI impacted by furloughs reported a growth of 0.1% QoQ & -0.5% QoQ. Geography wise North America (79.7% of mix) & India (10% of mix) grew sequentially by 3.7% & 6.2% while Europe (8.9% of mix) declined by 3.5% QoQ. EBIT margin of the company increased by 80 bps QoQ to 14.5% despite the headwinds of -60 bps impact of furloughs & -60 bps impact increase in subcon cost due to higher onsite mix due to the tailwinds of +80 bps impact of margin accretive IP led business, lower travel cost +30 bps, higher utilization +30 bps & lower SG&A expenses +60 bps. The company during the quarter won TCV of US$ 521.4 mn, up 8.8% QoQ with New TCV wins of US$277.4 mn. The company’s net employee during the quarter increased by 494 to 23,336 while attrition declined by 160 bps QoQ to 11.9%. The company declared interim dividend of Rs. 32 per share and it also announced the split of equity shares from existing face value of Rs. 10 to Rs. 5.
Views: The company’s growth remains consistent despite the headwinds of macro uncertainty. The company indicated although the overall macro environment remains unchanged it has seen some green shoots in discretionary spending. The company’s deal bookings continue to be strong with the deal pipeline being healthy indicating continued revenue growth visibility in the medium term. The company expects its EBIT margin to expand by 200-300 bps in the next 2-3 years aided by the factors of: i) increase in utilization, ii) SG&A rationalization & iii) decrease in amortization expenses.
Impact: Positive