BUY CMP 708.70 Target Price 815.00 PERSISTENT SYSTEMS LTD Result Update (CONSOLIDATED): Q4 FY15 APRIL 25 th 2015 ISIN: INE262H01013 Index Details Stock Data Sector IT BSE Code 533179 Face Value 10.00 52wk. High / Low (Rs.) 960.83/443.58 Volume (2wk. Avg.) 16000 Market Cap (Rs. in mn.) 56696.00 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 18912.52 20992.90 23092.19 EBITDA 4841.62 5276.99 5870.43 Net Profit 2906.31 3211.84 3552.95 EPS 36.33 40.15 44.41 P/E 19.51 17.65 15.96 Shareholding Pattern (%) 1 Year Comparative Graph PERSISTENT SYSTEMS LTD BSE SENSEX Highlights Persistent Systems Ltd, established in 1990 is a global company specializing in software product and technology innovation. Net Profit of the company for the current quarter zoomed by 13.17% at Rs. 760.50 mn compared to Rs. 671.99 mn in same period previous year. The company s net sales registered 11.35% increase in Q4 FY15 and stood at a record Rs. 4974.53 mn from Rs. 4467.37 mn over the corresponding quarter last year. During the quarter operating profit or EBIDTA stood at Rs. 1185.70 mn against Rs. 1187.68 mn in the corresponding quarter of the previous year. Profit before Tax increased to Rs. 958.15 mn in Q4 FY15 as compared to Rs. 923.27 mn in Q4 FY14, an increase of 3.78%. Persistent systems Ltd has recommended Final Dividend of Rs. 2.50 per share for FY 2014-15 and Special Silver Jubilee Dividend of Rs. 2.50 per share. The company Established 'Research and Innovation Board' to identify new scientific projects. Persistent Won Computer Society of India Awards for Excellence in IT for Beyond Search: Enabling Digital Transformation. Persistent Intranet, Pi received 'The Dataquest Business Technology Award' for Analytics Category. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 13% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Persistent Systems Ltd 708.70 56696.00 36.33 19.51 4.03 150.00 NIIT Technologies Ltd 368.15 22473.70 29.25 12.59 2.42 90.00 Zensar Technologies Ltd 739.40 32668.80 41.70 17.67 5.07 100.00 Mindtree Ltd 1233.30 103352.10 63.75 19.34 5.85 250.00
QUARTERLY HIGHLIGHTS (CONSOLIDATED) Results Updates- Q4 FY15 Rs. In Million Mar-15 Mar-14 % Change Net Sales 4974.53 4467.37 11.35 PAT 760.50 671.99 13.17 EPS 9.51 16.80 (43.41) EBITDA 1185.70 1187.68 (0.17) The company s net profit stood at Rs. 760.50 million against Rs. 671.99 million in the corresponding quarter ending of previous year, an increase of 13.17%. Revenue for the quarter rose up by 11.35% Rs. 4974.53 million from Rs. 4467.37 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 9.51 a share during the quarter as against Rs. 16.80 million over previous year period. Profit before interest, depreciation and tax is Rs. 1185.70 million as against Rs. 1187.68 million in the corresponding period of the previous year. Break up of Expenditure Break up of Expenditure Employee Benefit Expenses Cost of technical professionals Depreciation and amortization expense (Rs in millions) Q4 FY15 Q4 FY14 % CHNG 2948.18 2426.64 21% 293.69 228.53 29% 227.26 264.26-14% Other expenses 730.24 701.49 4%
Segment Revenue Rs. In Million Q4 FY15 Q4 FY14 CHNG % Infrastructure and Systems 2711.52 3197.14-15% Telecom and Wireless 810.28 691.67 17% Life Sciences and Healthcare 713.23 578.56 23% Financial Services 739.5 0.00-100% Latest Updates Persistent systems Ltd has recommended Final Dividend of Rs. 2.50 per share for FY 2014-15 and Special Silver Jubilee Dividend of Rs. 2.50 per share, on the expanded capital base post 1:1 Bonus issue. Persistent Systems Helps Elance-oDesk Relaunch User Community to Better Serve Freelancers and Clients. Persistent Won Computer Society of India Awards for Excellence in IT for Beyond Search: Enabling Digital Transformation. The company Established 'Research and Innovation Board' to identify new scientific projects, explore cutting-edge futuristic technologies and applications in its continuous pursuit to emerge as a global leader in technology. Persistent systems Ltd Collaborated with Lithium Technologies to help SANE Australia, a non-governmental organization (NGO), develop and launch its online communities to enable peer-to-peer support for both those experiencing mental illness and those who care for them. Persistent Intranet, Pi our own digitalizing of employee experience received 'The Dataquest Business Technology Award' for Analytics Category.
Geography Composition Onsite & Offshore Mix Revenue Mix
Revenue Concentration COMPANY PROFILE Persistent is a global company specializing in software product and technology innovation. For more than two decades, the company has partnered closely with pioneering start-ups, innovative enterprises and the world s largest technology brands. Persistent focuses on developing best-in-class solutions in four key next-generation technology areas: Cloud Computing, Mobility, Analytics & Collaboration for life sciences, telecommunications, consumer packaged goods, banking & financial services and healthcare verticals across North America, Europe, and Asia. Persistent is the first company in Asia to receive strategic investment from the Intel (IA-64) Fund. Persistent customers benefit from deep knowledge of next-generation Cloud, BI & Analytics, Collaboration as well as Mobility-based computing platforms. By leveraging its strategic technology partnerships, IP-based accelerators, and agile development processes companies can successfully navigate increasing time-to-market pressures and deliver the highest quality solutions, faster and more cost effectively. Persistent global team is made up of the industry s best and brightest software engineers and technology consultants whose expertise spans from niche technologies, to the latest technologies & built-to-scale enterprise applications. Product Life Cycle Product Concept Product Design Product Engineering / Development Professional Services Maintenance & Support Industrial Design & Engineering
Services offered Cloud Collaboration Big Data BI & Analysis Mobility Security Embedded Industries Technology Telecommunications Life Sciences Consumer Packaged Goods Banking & Financial Services Healthcare Partnerships Cisco IBM Microsoft Nokia QT Sales force Subsidiary Companies Persistent Systems France Persistent Systems, Inc. Persistent Systems Pvt. Ltd. Persistent Telecom Solutions Inc.
FINANCIAL HIGHLIGHTS (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31 st, 2014-2017E PERSISTENT SYSTEMS LTD 2014A 2015A 2016E 2017E EQUITY AND LIABILITIES: Shareholders Funds: Share Capital 400.00 800.00 800.00 800.00 Reserves and Surplus 11823.44 13255.29 14978.48 16775.90 Net worth (a) 12223.44 14055.29 15778.48 17575.90 Non-Current Liabilities: Long-term borrowings 31.87 24.72 19.28 16.97 Deferred Tax Liabilities 0.65 2.51 3.14 3.58 Other Long Term Liabilities 300.59 1.47 0.12 0.08 Long Term Provisions 93.23 115.98 135.70 151.98 Total Non-Current Liabilities (b) 426.34 144.68 158.23 172.61 Current Liabilities: Short term borrowings 0.00 0.00 0.00 0.00 Trade Payables 433.73 528.72 613.32 686.91 Other Current Liabilities 1140.11 1264.72 1378.54 1461.26 Short Term Provisions 1210.87 1755.23 2018.51 2220.37 Total Current Liabilities (c) 2784.71 3548.67 4010.37 4368.54 Total Liabilities (a+b+c) 15434.49 17748.64 19947.09 22117.04 ASSETS Non-Current Assets: Fixed Assets Fixed Assets: 4361.75 4092.58 4338.13 4572.39 Goodwill on Consolidation 22.94 23.91 25.34 26.61 Non Current Investments 823.23 2115.54 2496.34 2883.27 Deferred tax assets 260.77 315.44 353.29 388.62 Long Term Loans and Advances 137.97 113.84 120.67 129.12 Other non-current assets 459.44 13.39 16.74 19.08 Total Non Current Assets (d) 6066.10 6674.70 7350.52 8019.10 Current Assets: Current Investments 4071.36 4619.75 5174.12 5639.79 Trade Receivables 3028.17 3585.76 4123.62 4717.43 Cash and Bank Balances 956.54 1416.24 1671.16 1928.52 Short Term Loans and Advances 410.07 416.79 447.31 484.88 Other Current Assets 902.25 1035.40 1180.36 1327.33 Total Current Assets (e) 9368.39 11073.94 12596.57 14097.95 Total Assets (d+e) 15434.49 17748.64 19947.09 22117.04
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 16691.53 18912.52 20992.90 23092.19 Other Income 310.16 938.15 994.44 1044.16 Total Income 17001.69 19850.67 21987.34 24136.35 Expenditure -12548.62-15009.05-16710.35-18265.92 Operating Profit 4453.07 4841.62 5276.99 5870.43 Interest -0.53-3.37-3.64-3.97 Gross profit 4452.54 4838.25 5273.35 5866.46 Depreciation -1025.95-938.53-1013.61-1084.57 Profit Before Tax 3426.59 3899.72 4259.74 4781.90 Tax -933.82-993.41-1047.90-1228.95 Profit After Tax 2492.77 2906.31 3211.84 3552.95 Equity capital 400.00 800.00 800.00 800.00 Reserves 11823.44 13255.29 14978.48 16775.90 Face value 10.00 10.00 10.00 10.00 EPS 62.32 36.33 40.15 44.41 Quarterly Profit & Loss Statement for the period of 30 th Sep, 2014 to 30 th June, 2015E Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-June-15E Description 3m 3m 3m 3m Net sales 4641.74 4946.38 4974.53 5093.92 Other income 269.47 247.44 183.28 197.94 Total Income 4911.21 5193.82 5157.81 5291.86 Expenditure -3680.01-3951.04-3972.11-4049.67 Operating profit 1231.20 1242.78 1185.70 1242.20 Interest -0.23-2.65-0.29-0.30 Gross profit 1230.97 1240.13 1185.41 1241.89 Depreciation -237.20-246.48-227.26-236.35 Profit Before Tax 993.77 993.65 958.15 1005.54 Tax -280.62-249.03-197.65-247.36 Profit After Tax 713.15 744.62 760.50 758.18 Equity capital 400.00 400.00 800.00 800.00 Face value 10.00 10.00 10.00 10.00 EPS 17.83 18.62 9.51 9.48
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 62.32 36.33 40.15 44.41 EBITDA Margin (%) 26.68 25.60 25.14 25.42 PBT Margin (%) 20.53 20.62 20.29 20.71 PAT Margin (%) 14.93 15.37 15.30 15.39 P/E Ratio (x) 11.37 19.51 17.65 15.96 ROE (%) 20.39 20.68 20.36 20.21 ROCE (%) 44.82 41.12 39.82 39.53 Debt Equity Ratio 0.00 0.00 0.00 0.00 EV/EBITDA (x) 6.15 11.42 10.43 9.33 Book Value (Rs.) 305.59 175.69 197.23 219.70 P/BV 2.32 4.03 3.59 3.23 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 708.70, the stock P/E ratio is at 17.65 x FY16E and 15.96 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs. 40.15 and Rs. 44.41 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 13% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 10.43 x for FY16E and 9.33 x for FY17E. Price to Book Value of the stock is expected to be at 3.59 x and 3.23 x for FY16E and FY17E respectively. We recommend BUY in this particular scrip with a target price of Rs. 815.00 for Medium to Long term investment. INDUSTRY OVERVIEW India is the world's largest sourcing destination for the information technology (IT) industry, accounting for approximately 52 per cent of the US$ 124-130 billion market. The industry employs about 10 million Indians and continues to contribute significantly to the social and economic transformation in the country. The IT industry has not only transformed India's image on the global platform, but has also fuelled economic growth by energising the higher education sector especially in engineering and computer science. India's cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US, continues to be its unique selling proposition (USP) in the global sourcing market. The Indian IT and ITeS industry is divided into four major segments IT services, business process management (BPM), software products and engineering services, and hardware. The IT-BPM sector in India grew at a compound annual growth rate (CAGR) of 25 per cent over 2000-2013, which is 3-4 times higher than the global IT-BPM spend, and is estimated to expand at a CAGR of 9.5 per cent to US$ 300 billion by 2020. India has emerged as the fastest growing market for Dell globally and the third largest market in terms of revenue after the US and China, said Mr Alok Ohrie, Managing Director, Dell India. Outlook Internet should be a basic human right, say 87 per cent of internet users in India, compared with 83 per cent globally, according to a report by Centre for International Governance Innovation (CIGI). India continues to be the topmost offshoring destination for IT companies followed by China and Malaysia in second and third
position, respectively. Emerging technologies present an entire new gamut of opportunities for IT firms in India. Social, mobility, analytics and cloud (SMAC) collectively provide a US$ 1 trillion opportunity. Cloud represents the largest opportunity under SMAC, increasing at a CAGR of approximately 30 per cent to around US$ 650-700 billion by 2020. Social media is the second most lucrative segment for IT firms, offering a US$ 250 billion market opportunity by 2020. The US$ 12 billion plus rising Indian e-commerce business market is witnessing a rush of hiring and may need 100,000 people over the next six months, as per industry experts. The industry offers a slew of opportunities and scope for innovation thereby attracting the young mind to push their limits. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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