Earnings Outlook
Persistent Systems' net profit seen 3.3% lower QoQ
This story was originally published at 16:58 IST on 15 July 2024
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By Noel John
MUMBAI – Persistent Systems Ltd will likely report a sequential decline in its consolidated net profit and its operating margin for the June quarter owing to sectoral headwinds including the impact of higher visa costs, wage hikes, investment costs, and onsite deal ramp-ups, according to analysts.
The Pune-based technology services company is likely to report a 3.3% sequential decline in its Apr-Jun net profit to 3.05 bln rupees, according to an average of estimates of 10 brokerages. The operating margin, or earnings before interest and tax margin, is seen at 14.04% for the June quarter, according to the average of estimates from eight brokerages. The company's EBIT margin was at 14.5% in Jan-Mar.
The estimates for the company's net profit in Apr-Jun are in the range of 3.00 bln-3.22 bln rupees, while the EBIT margin was in a range of 13.60-14.60%.
"Headwind from the absence of margin benefit from earn-out reversal will be offset by the absence of one-time transition costs and higher utilisation," Kotak Institutional Equities said in its pre-earnings report.
While margins are currently lower, keeping earnings temporarily low, the potential for margin expansion over the medium term remains intact, Anand Rathi Shares and Stock Brokers said in its report. The brokerage added that the company usually recovers faster than the sector during upcycles.
These metrics are seen lower even as the company's topline is expected to grow 3.7% from a quarter ago and 15.7% from a year ago to 26.85 bln rupees during the June quarter, according to the average of estimates of 10 brokerages. The estimates for net sales are in the range of 25.07 bln-27.24 bln rupees.
The healthy growth in the company's revenue in Apr-Jun will likely be driven by healthcare, hi-tech, and banking and financial services verticals. Further, deal ramp-ups in the healthcare segment and other large deals won in earlier quarters will also aid its June quarter performance, analysts said.
Analysts see the company's deal wins in Apr-Jun to be similar to the previous quarter. The company's order book was $448 mln as of Mar 31, driven by new deal wins in its core business segment.
In Jan-Mar, the company reported a 10.2% sequential rise in its consolidated net profit to 3.15 bln rupees. The net sales in Jan-Mar rose 3.7% sequentially to 25.90 bln rupees. The company is scheduled to announce earnings for the quarter ended June on Thursday.
Market participants will watch out for the management's commentary on the outlook for the hi-tech vertical, overall demand, margin for the rest of the financial year, and plans for hiring and acquisition.
|
Broker name |
Net Sales |
Net Profit |
EBIT |
|
-------(In mln rupees)------- |
|||
|
Anand Rathi Share and Stock Brokers Ltd |
25,071.00 | 3,053.00 | 13.80 |
| Incred Research Services Pvt Ltd | 27,241.00 | 3,006.00 | 14.00 |
| Indsec Securities and Finance Ltd | 27,100.00 | 3,000.00 | 13.90 |
| Kotak Institutional Equities | 26,823.00 | 3,033.00 | 14.30 |
| KR Choksey Research | 27,062.00 | 3,091.00 | 14.10 |
| Motilal Oswal Financial Services Ltd | 27,243.00 | 3,215.00 | 14.00 |
| Nirmal Bang Equities Pvt Ltd | 26,666.00 | 3,052.00 | 14.60 |
| Nuvama Wealth Management Ltd | 27,070.00 | 3,026.00 | ---- |
| Phillip Capital (India) Pvt Ltd | 27,069.00 | 2,999.00 | 13.60 |
| Sharekhan Ltd | 27,190.00 | 3,010.00 | ---- |
| Average | 26,853.50 | 3,048.50 | 14.04 |
Today, shares of Persistent Systems ended 0.3% lower at 4,794.50 rupees on the National Stock Exchange.
End
US$1 = 83.57 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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