Persistent Systems Q3FY18: Healthy Performance Aided By IP Revenue; Buy | Persistent Systems Q3FY18 Results |

Outlook & Valuation

We continue to believe that Persistent’s long-term strategic business direction remains on track, with increasing revenue from Digital Business and Enterprise Services, led by key services including IoT. Its increasing focus on IP and non-linear revenue through the IBM partnership along with allied deal wins, and reducing focus on linear, effort-based revenue drives our underlying confidence on quality of revenue and long-term margin sustainability and improvement. We believe from a structural perspective, higher IP revenue is the biggest margin lever for Persistent.

We upgrade FY18/FY19E EPS by 6-14% after the beat in 3QFY18. Rolling over our estimates to FY20E, we upgrade our recommendation on the stock to BUY from HOLD, with a revised Target Price of Rs 920 (from Rs 705 earlier).

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About Reliance Securities

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