The information technology sector stock Persistent Systems is in the spotlight today after the company announced its Q3 results. In early trading hours, the company’s share price is trading down by over 3%.
Brokerages are however reading the same data very differently, let’s take a look at what leading brokerages like Motilal Oswal and Nomura say about this stock
Motilal Oswal on Persistent Systems: Positive on growth outlook
The domestic brokerage house Motilal Oswal has maintained a ‘Buy’ rating on the stock and has set a target price of Rs 8,500 This implies an upside potential of around 34% from current levels.
The brokerage believes that the company’s business model and order pipeline support sustained growth over the medium term.
As per the brokerage report, one of the key takeaways from the Q3 results was margin expansion, even as the company faced headwinds such as wage hikes and furloughs. Adjusted earnings before interest and tax (EBIT) margin improved by 40 basis points quarter-on-quarter to 16.7%.
Motilal Oswal on Persistent Systems: A look at margin lever
Motilal Oswal noted, “Margin expansion surprising; internal AI tools/platforms emerging as a margin lever.” It added that internal platforms like SASVA, iAura, and the GenAI Hub are now being used not just in delivery but also in pricing discussions with clients.
The brokerage also noted, “Around around 150bp of margin benefit this quarter came from a combination of tool-led pricing and productivity-led manpower optimization.” However, it cautioned that further margin gains from this lever may be limited, as management could reinvest benefits to support future growth.
On the growth front, Persistent Systems reported revenue growth that came in above expectations. According to Motilal Oswal, “Growth came in above estimate; FY27 target intact.” The brokerage pointed out that the banking, financial services and insurance segment and the healthcare segment led the growth during the quarter.
Motilal Oswal on Persistent Systems: AI partnerships a gamechanger
Another factor the brokerage house noted is Persistent Systems’ growing focus on artificial intelligence services. The brokerage noted, “Emerging AI partnerships signal maturing AI services stack and faster enterprise adoption.” New partnerships with global technology players are expected to help the company embed artificial intelligence deeper into its core offerings such as application modernisation and engineering services.
Nomura on Persistent Systems: Turns cautious on valuation
Another global brokerage Nomur retained a ‘Neutral’ rating on the stock with a target price of Rs 6,100. This indicated a potential downside of nearly 4% from current levels.
Nomura noted, “Margin beat led by AI platform and tool-driven pricing models.” It pointed out that multiple factors, including artificial intelligence-led pricing, currency benefits and better utilisation, helped offset the impact of wage hikes during the quarter.
Nomura on Persistent Systems: Cautious
Nomura has marginally raised its earnings estimates for Persistent Systems. However, it remains cautious due to the stock’s valuation.
The brokerage added, “We retain our Neutral rating given the stock’s rich valuation.” It also highlighted that the stock is trading at a relatively high multiple compared to peers in the mid-cap information technology services space.
Conclusion
Overall, here one brokerage sees room for further upside driven by artificial intelligence adoption and steady execution, another prefers a wait-and-watch approach due to valuation concerns.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.