Persistent Systems shares slide 5% despite Q2 revenue growth. Buy, sell or hold?
Persistent Systems shares fell 5% despite 7.8% sequential constant-currency revenue growth in Q2FY27, as margin contraction and a sharp decline in profit weighed on sentiment. Brokerages remained divided on the stock amid valuation concerns and acquisition-related costs.
Persistent Systems shares slipped 5.03% to Rs 5,544 on BSE following the IT services company's announcement of robust Q2FY27 revenue growth. Despite strong top-line growth, the company's profit margins struggled due to increased costs and integration expenses from its acquisition of Nagarro. While revenue rose 7.8% quarter-over-quarter in constant currency to $487.6 million, EBIT margin contracted to 15%, missing estimates.
Profit after tax declined 27.2% quarter-over-quarter to Rs 351.51 crore. Total contract value was $633.5 million, with some delay in client decision-making at the quarter's end due to macro-related uncertainties. CEO Sandeep Kalra highlighted 26 consecutive quarters of growth and a 7.8% quarter-over-quarter increase, but noted margin pressure from wage hikes, lower utilization, and amortisation costs linked to a significant customer deal.
Analysts maintained mixed views, with Nomura retaining a Neutral rating and raising the target price to Rs 5,600, while JPMorgan and CLSA kept their Overweight and High Conviction Outperform ratings, respectively, with varying target prices.
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