Strong deal momentum to keep Street hooked on to Persistent
Persistent Systems, a mid-tier IT services company, has gained 10% since its second-quarter result announcement last Tuesday, taking the three-month return to 20%. The stock has remained buoyant following the company's strong business momentum in the September quarter, even as the broader market has shown weakness.
The key business vertical of hi-tech and emerging industries, where the revenue growth has been sluggish over the past few quarters, is likely to show a turnaround given the new deal wins. The company's management also expects to improve the operating margin in the second half of the fiscal year with rising utilisation levels.
The company reported above 5% sequential revenue growth for the second consecutive quarter. Revenue grew by 5.3% to $345.5 million, driven by the banking, financial services and insurance (BFSI), and healthcare verticals, contributing 59% to the top line. Each of these two verticals reported 8-10% sequential revenue growth. The company's biggest vertical, software, hi-tech and emerging industries, which clocked 41% of the revenue, showed sluggish growth of 0.8% during the quarter. While global supply chain issues have kept the segment's revenue depressed in the past, the management believes that it's time for a recovery.
«We believe the slowdown in the hi-tech vertical has bottomed out as we see more deal flows there,» Persistent's chief financial officer Vinit Teredesai told ET adding that the rate of deal conversion in the vertical has also improved.
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