Persistent Systems on Tuesday reported a 17.81% rise in consolidated net profit to Rs 439.45 crore for the quarter ended December, while revenue from operations climbed 23.37% year-on-year to Rs 3,778.20 crore. Sequentially, profit declined 6.7% and revenue rose 5.5%, with results absorbing a one-time Rs 89 crore impact from the implementation of new labour codes. With the headline numbers now digested, analysts are sharpening their views on what comes next for the stock.
Nuvama: Buy, target raised to Rs 7,700
Nuvama maintained a ‘Buy’ rating on Persistent Systems and raised its target price to Rs 7,700 from Rs 7,000, pointing to broad-based growth and improving profitability.
The brokerage said Q3FY26 delivered “strong, broad-based growth across verticals, led by Healthcare, BFSI, and Hi-tech,” while deal momentum remained healthy with robust total contract value and annual contract value. It highlighted continued margin expansion despite wage hikes, driven by “AI-led platform monetisation, operating leverage, and cost optimisation.”
According to Nuvama, management flagged AI platforms as a key driver of both margins and growth, prompting the brokerage to upgrade its EPS estimates on the back of a higher margin outlook and rolled-forward valuation. While acknowledging premium valuations, it said it maintains a positive stance on the stock.
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Motilal Oswal: Margin beat surprises, Buy reiterated
Motilal Oswal reiterated its ‘Buy’ rating on Persistent Systems with a target price of Rs 8,500, implying a 34% upside from the current market price of Rs 6,343, describing the quarter as “business as usual” but with an unexpected margin kicker.
The brokerage noted that Persistent reported Q3FY26 revenue of $422 million, up 4.0% quarter-on-quarter in dollar terms and 4.1% in constant currency, slightly ahead of estimates. Adjusted EBIT margin stood at 16.7%, well above the brokerage’s expectation of 15.0%, while adjusted PAT came in at Rs 5 billion, excluding the one-time labour code cost of Rs 890 million.
Motilal Oswal said the margin expansion was “surprising,” attributing it to internal AI tools and platforms such as SASVA, iAura and the GenAI Hub, which are now embedded in delivery and pricing discussions with clients. “Around ~150bp of margin benefit this quarter came from a combination of tool-led pricing and productivity-led manpower optimization,” it said, adding that management does not expect further expansion from this lever as gains are likely to be reinvested to drive growth.
The brokerage raised its estimates by 3–4% to reflect strong margin gains and revenue momentum, projecting an 18% USD revenue CAGR over FY25-27 and more than 28% EPS CAGR. It values the company at 45x FY28E EPS, arguing that on a PEG basis, the valuation still has room for upside.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
