Persistent Systems Ltd is a mid-cap information technology company with a market capitalization of Rs 33,856.28 crore. On the NSE, the stock has climbed from Rs 1826.55 on March 17, 2021 to Rs 4,430.00 on March 16, 2022, 3:30 pm IST, representing a multibagger return of 142.53 percent. The stock is down -9.07 percent year to date (YTD) but is up 25.21 percent in the last six months. In one month, the stock has gained by 13.21 percent, and in the previous five days, it has grown by 4.89 percent. The brokerage firm Sharekhan has given the stock a buy call rating with a target price of Rs. 5,550.
The brokerage has said "Persistent Systems Limited (PSL) announced acquisition of Google cloud premium partner MediaAgility Inc. (MediaAgility) for a total consideration of $71.7 million (including earnouts and retention-based payment). MediaAgility (revenue $25.5 million as on LTM basis - December 2021) is a Gartner-recognised public cloud transformation services provider with a specialisation in the Google Cloud ecosystems. With this acquisition, PSL will launch its Google business unit to accelerate cloud-led digital transformation and cross-sale its vertical and industry solutions to Google Cloud marketplace."
According to Sharekhan "PSL aspires to build strong practice across leading Cloud technologies (already have $100 million+ practice for IBM and Salesforce and scaled Microsoft Cloud practice by acquiring Data Glove in February 2022). We believe this transaction will help the company to scale-up its Google cloud practice in coming years."
Buy for a target price of Rs. 5,550
"PSL is well-poised to deliver industry-leading growth in FY2023, led by its strong digital competencies, robust ACVs, and broad-based demand. The acquisition will strengthen its partnership with Google and enable it to capture opportunities in highgrowth markets. We believe that revenues from MediaAgility would add around 3% to PSL's topline and the transaction is valued at 2.8x of CY2021 revenues. EBIDTA margins of MediaAgility is similar to PSL," the brokerage says.
"At the CMP, the stock trades at a valuation of 38x/31x its FY2023E/FY2024E earnings, justified considering the strong revenue growth potential, robust deal wins and strong demand. We expect USD revenue/earnings to report a CAGR of 24%/25% over FY2022-FY2024E. Given healthy operating cash flow generation and strong balance sheet, we retain our Buy rating on the stock with an unchanged price target (PT) of Rs. 5,550," Sharekhan has claimed.
Slowdown in non-Internet of Things (IoT) revenue/delay in product launches/stronger rupee and/or adverse cross-currency movements could affect earnings are key risks of the stock as per the brokerage.
The stock has been picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.