The shares of Persistent Systems have steam to rally another 40% on the back of multiple growth drivers, global brokerage CLSA said on December 5 and raised the target price on the stock to the highest ever.

CLSA believes that shares of Persistent Systems can rally up ₹8,462, an upside of more than 40% from previous closing price on December 4. The brokerage has given the IT stock an ‘outperform’ rating.

As the brokerage note, there are multiple growth drivers and margin levers that are leading to higher estimates. Persistent Systems is operating in a different league on the back of a unique set of capabilities, it said.

CLSA sees an increase in both near-term and longer-term revenue growth forecasts. It has projected the firm to witness a 21% US dollar sales compound annual growth rate (CAGR) (CAGR) over FY25-27.

The brokerage has raised EBIT margin assumption for FY27 to 16.2% from 15.5% earlier.

Last week, JPMorgan had also said that Persistent Systems is the most expensive tech stock globally with one year forward P/E of 58x. It believes that the valuation is likely to sustain or it could even re-rate further.

The expects the company to see a 22% revenue CAGR over FY25-27 versus IT companies’ growth of 8%.

The brokerages’ commentary comes more than a month after the mid-tier IT services company reported its earnings for the July to September 2024 quarter.

Also Read: The most expensive tech stock may sustain its valuations or even re-rate further, says JPMorgan

It saw a 23.4% year-on-year (YoY) increase in net profit at ₹325 crore for the second quarter that ended September 30, 2024. Its revenue from operations surged 20.1% to ₹2,897 crore against ₹2,412 crore in the year-ago period.

Persistent Systems’ earnings before interest and taxes (EBIT) increased 5.8% quarter-on-quarter (QoQ) to ₹406.2 crore from ₹384 crore, according to the regulatory exchange filing by the company. The EBIT margin was flat at 14% in the September quarter versus the June quarter.

Persistent Systems has maintained its $2 billion revenue aspiration by financial year 2027 and aims to grow its margins by up to 300 basis points over the next two to three years.

The IT stock traded 1.5% higher at ₹6,105.85 on NSE at 9:55 am. In the past year, the stock has made investors 91% wealthier as against the benchmark Nifty 50 which has risen 17% during the period.

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