Accumulate Persistent Systems; target of Rs 680: Dolat Capital

Dolat Capital's research report on Persistent Systems

With gain in size of the business operations and diversity, Persistent has been constrained on management bandwidth at the leadership level. To address this long due requirement, Persistent appointed Mr. Christopher (Chris) O’Connor as CEO of the company in Feb’19. Chris is a long time IBM veteran and has led their IoT business unit. He was part of the top-300 club at IBM, and has held various managerial roles. We believe that Chris’s experience, understanding of the IBM products and access with all key IT decision makers could be instrumental to drive the Alliance business (~29% of revenues all linked with IBM). The first and foremost upmove can come from the IBM reseller business.

Outlook

We are excited about the company’s renewed focus on specific growth areas and strengthening of leadership, which are strong potential triggers for the stock driver in the near-to-medium term. The stock trades at inexpensive valuation of 11x FY21E earnings, which provides reasonable comfort to us. We maintain our ACCUMULATE rating, with a TP of ` 680 based on 13x one-year fwd. PER.

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