On Wednesday, ICICI Securities adjusted its stance on Persistent Systems (NS:PERS) Ltd. (PSYS:IN), downgrading the stock from Buy to Add, while simultaneously raising the price target to INR6,790.00 from the previous INR6,140.00.
The revision by ICICI Securities reflects a positive outlook on the company's performance despite a challenging demand environment, as well as its balanced portfolio mix and strong capabilities in artificial intelligence (AI) and generative AI (GenAI).
Persistent Systems has been recognized for its consistent industry-leading revenue growth, even amidst market challenges. The company's exposure to high-growth verticals such as Banking, Financial Services and Insurance (BFSI), hi-tech, and healthcare, combined with minimal exposure to the currently troubled automotive sub-segment, has been noted as a significant factor in its robust performance.
The firm's competencies and offerings in AI and GenAI have also been highlighted as key strengths. These capabilities are seen as instrumental in driving the company's growth and positioning it favorably within the technology sector.
Despite the positive aspects of Persistent Systems' business, ICICI Securities has expressed caution due to the stock's valuation. The stock has experienced an 18% increase over the past three months, leading to what the firm considers stretched valuations. This concern has prompted the downgrade to an Add rating.
ICICI Securities has maintained its valuation method for Persistent Systems, applying a target multiple of 51 times on one-year forward earnings of INR 133 per share, which supports the new price target of INR 6,790. However, the analysts have also acknowledged an industry-wide risk of demand challenges that could potentially impact the company's future performance.
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