1:2 Stock Split, 320% Dividend: Rs 8500 Multibagger IT Stock's Outlook Strong; Ex-Dividend, Ex-Split Soon

IT major, Persistent Systems has recorded a significant jump in its share price this week, after announcing a healthy Q3 and declaring a host of rewards for investors. Persistent will soon turn ex-dividend for a whopping Rs 32 per share interim dividend, while investors keenly await the record date for 1:2 ex-split. But before that, Persistent has already met brokerages target prices, crossed the Rs 8,700 mark from below Rs 8,000, and gained by 7% in the past five days.

Persistent Systems Share Price:

Although, there are few corrections in Persistent on Thursday's trade, as investors book profits. The fundamentals of Persistent are positive, something that investors should take note of before the share price turns ex-dividend and ex-split.

Persistent share price traded at Rs 8,343.10 apiece, down by 1.51% on BSE with a market cap of Rs 64,179.30 crore at the time of writing on Thursday. But the stock price is trading higher from last week, and it's so far floating for a weekly upside.

The IT stock was below Rs 7,900 last week, and extended its rally to hit a new 52-week high of Rs 8,716.65 apiece on January 23rd. The stock price is up by 7.3% in the past five trading sessions, while in a month it has gained by over 13%. In six months, Persistent gives a whopping 78% return. And from its 52-week low of Rs 3,959.25, the stock is trading as a multi-bagger as of January 25, 2024, with an upside of a massive 115%.

With the latest 52-week high, Persistent surpassed the target prices of brokerages like Elara Capital, KR Choksey, Motilal Oswal and Axis Securities in a matter of few days.

However, with few hiccups in stock price, the potential in Persistent is still Rs 8,700 mark which is the highest target price by Axis Securities.

Persistent Systems Dividend:

The company declared an interim dividend of Rs 32 per share having a face value of Rs 10 each for FY24. The company fixed January 30 as the record date, which will also be the ex-dividend date.

In percentage terms, the dividend payout will be to the tune of 320%.

To be eligible, shareholders must have shares of Persistent in their demat accounts by the record date. That is because, as per BSE FAQs, all eligible shareholders with their names on the list at the end of the record date will be eligible to receive dividends.

The dividend will be paid to the Members within 30 days of its declaration by February 18, 2024.

This will be the first interim dividend for FY24. Earlier, in FY23, the company paid dividends up to 500% amounting to Rs 50 per share.

Persistent Systems Upcoming Stock Split:

The stock price of Persistent will break into two on ex-split day which is yet to be announced by the company.

Persistent has announced a stock sub-division/split for its existing shareholders having their equity shares at the face value of Rs 10 each. The move is done to enhance the liquidity of the company's shares and make it affordable to the investors.

The stock split is in the ratio of 1:2 -- which means that -- 1 existing equity share having a face value of Rs 10 each will be sub-divided into two equity shares having a face value of Rs 5 each on fully paid-up.

Persistent plans to executive the stock split approximately 3 months from the date of approval of the Members of the Company and subject to completion of the necessary formalities.

Persistent shares will become cheaper from their current level once the stock split takes place. This is due to the face value of the shares at times of stock sub-division, which reduces in proportion to the split ratio, however, there is no impact on the company's share capital and reserves. Although the price value of a stock reduces in a stock split, the number of shares held rises in the investors' portfolio of that specific stock.

Persistent Systems Fundamentals Strong:

In its research note, KR Choksey said, the Company has registered a revenue CAGR of 27.3% from FY20 to FY23 and continues to deliver healthy deal wins and strong margin expansion. Given the robust growth prospects, the stock has re-rated quite sharply, especially over the past few months, which is also reflected in a sharp share price appreciation of almost 80% over the past year.

Meanwhile, Elara Capital in its note said, "Even in a seasonally weak Q3, PSYS was able to lead industry growth. This was enabled by better demand and certainty of topline growth for PSYS versus the industry's cautionary demand status. We factor in Q3 performance and roll forward to Dec-25E ending EPS. We raise FY25E/26E EPS 4.5%/ 7%, respectively. Expect USD sales CAGR of 14.4%, an EBIT CAGR of 20% and EPS CAGR of 23% in FY23-26E."

Further, Motilal Oswal cited Persistent's management commentary. It said, the demand environment remains fluid with account mining and new deal wins serving as the major drivers for growth. Both existing and newly acquired
accounts played a significant role in driving top-line growth in 3Q. While there are some green shoots in the discretionary spending, it is not yet substantial.

Motilal's note added, that while its peers have struggled to deliver positive growth and outlook, PSYS has maintained its growth momentum with sharp execution on margins during the quarter. On the stock price, it said, "The stock is currently trading at a rich valuation of 36x FY26E EPS, leaving little room for further upside, despite the strong growth delivery. We believe PSYS' valuation appropriately factors in the favourable growth along with the adverse macro environment."

In the long term, Axis Securities note said, "From a long-term perspective, we believe Persistent is well-placed for encouraging growth, given its multiple long-term contracts with the world's leading brands. Its improved revenue visibility gives us confidence in its business growth moving forward. However, rising concerns over the prospects of large economies along with prevailing supply-side constraints pose uncertainties over the company's short-term growth rates."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.