Persistent Systems-Potential Multibagger

Stock Opportunities
189

Sameer Bendre to lead the New Chief of Operations Role,
Yogesh Patgaonkar joins as Chief People Officer.

Sameer Bendre, formerly Chief People Officer, will take on the role of Chief of Operations with
the responsibility for overseeing Persistent’s ESG and Risk Management priorities as well as
the company’s Enterprise Information Systems and Administration functions.
Yogesh Patgaonkar has joined Persistent Systems as Chief People Officer. In this role, he will
be responsible for Persistent’s Global HR function, including Learning & Development as well as
Talent Acquisition.

New to Persistent, Yogesh brings over 28 years of experience handling strategically critical
roles setting up and scaling the HR function to cater to global operations across leading
organizations like RPG Group, L&T, Mphasis. He joins Persistent after a consulting stint where
he set up a successful practice to work on executive coaching and strategic interventions for a
diverse set of organizations across industries. Yogesh will be a member of Persistent’s
executive team and will be based out of Pune, India.

Sandeep Kalra, Chief Executive Officer and Executive Director, Persistent Systems
“We are excited to welcome Yogesh to the Persistent family as we embark upon the next phase
in our talent transformation journey. As we continue to grow organically and through acquisitions
around the world, Yogesh’s diverse experience across HR, P&L and consulting will help in the
seamless integration and development of our global workforce. At the same time, ESG and Risk
Management are at the core of our strategy, and we look forward to Sameer’s leadership in
driving tangible business outcomes in these areas as well as other operational efficiencies.”

Disclosure : Not Invested.

190

Persistent again delivered industry leading growth on revenue and profitability, but it still has potential to grow.

  1. Already hit $1 Bn revenue runrate based on Q2 annualized, I was expecting it later in this year- TTM was $914Mn ( 766 for FY22 and 566 in Fy21).
  2. Revenue Up 40 % , PAT is up 36 %, some margin pressure is evident, but less than peers.
  3. Their EBIT has gone to 14.6 from 14.3 %, but PAT dipped to 10.7 % from 11.3 % one quarter ago ago.

Psys now shows the signs of the virtuous cycle of higher revenue> incoming leads>more conversions>more revenue/margins.

Worries:
1 Integration of the acquisitions, Persistent needs to ensure the business and employees of the acquired companies stay, often services acquisitions (unlike product where you get tangible IP and sticky Customer base) just get wasted as people leave.
2 They are highlighting the Stock price performance, and inclusion in Indexes, instead of focusing on the business performance.
3 Attrition is flat and remains a major concern, this quarter was 23.7%, FY22 avg was 26.6% . Persistent has niche skill needs, they will not find replacement easy.
4 IP led business (higher margin, more scalable) has been steadily declining in the last few quarters.
5 Higher exposure to High Tech vertical, which can get impacted badly in the coming months with US recession and revenue slowdown in tech sector which is becoming very visible.

Investor PPT: https://www.persistent.com/wp-content/uploads/2022/10/analyst-presentation-and-factsheet-q2fy23.pdf

Disc: Psys is still my biggest holding (despite being down 25 % from Peak), I have not sold any, valuations have moderated, I did add a little on valuation corrections recently.

191
2 Likes
192
2 Likes
193
194

https://x.com/animesh231991/status/1724396842321117507?s=61

196

Amazing results from Persistent - 3.3 % QTR growth and ACV is increasing with new business shows confidence of management is executing.

Quite expensive to add but will not trim and good divdend yield. Holding since 2019.

Disc: No buy or sell recommendation. Largest position in my portolio. you can find here

197

Team – After having gone through the Persistent Systems results and listening to the Earning Conf Call I am sharing my perspective on the results and the stocks price volume action today.

  1. Business Performance – I see no issues in the execution by the management and company. The results have been very much in line with what has been the recent trend and expectations. In fact, I see no sign of any gloom or doom in the management commentary in contrast to the Persistent’s larger peers.

  2. About Margins guidance going forward - The Management is indicating that the anticipated margin growth of 200-300 bps will take longer than expected. They maintain that the goal is to reach those goals in the next 2-3 years. They clearly anticipate pressure on margins and growth in the market due to macroeconomic and geo-political issues but would like to prioritise growth in FY 2024-25. Hence rather than take a hit on lower growth to maintain margins they are guiding that in FY25 they would like to prioritise growth.

  3. Larger transformative deals they are winning involve higher upfront transition costs and require hiring of people in proximate Onshore / customer locations. The margins from these wins will improve as resourcing mix moves to more of offshore (India-based) resources.

4.They continue to spend more and double down on Sales & Business Development, travel and hiring management & business leadership talent to scale growth. This may be impacting the margins currently but, in my opinion, this is spending for the right reasons.

  1. Stocks Price Volume action today – Persistent Systems has been no doubt an Expensive Performer compared to its peers. Many in the market who are impatient about growth and margins did not like the Management’s guidance on prioritising growth over margins in FY25, so that set of investors sold out today. Also given that the price went down by up to 10% during the day investors like me who follow automated trailing stop loss triggers got dragged along. Today was a day for a correction of markets expectations. Depending on how one sees their position in this stock - as a Investor / Trader, it is up to you to take a view and follow your systems in a disciplined manner.

  2. Right now, I do not find any reason for concern apart from street’s built up expectations of a clockwork like progress on margin improvement and sales growth to target $2 Bn likely getting delayed.

  3. Let us look for commentary from Analysts who track this stock closely for any other red flags or concerns before taking a view on next steps.

  4. Once again, the usual disclaimers apply – I am not a registered analyst or investment advisor. This is not investment advice. Do your own analysis and be responsible for it.

8 Likes
198

Sales Growth has been falling with rate ~ PAT Growth

BFSI (High Interest Rates) is still falling with Healthcare coming to the rescue. However EBIT in Healthcare is surprisingly lower despite similar margins.

P/E of 50 for growth rate of 16% is slightly on higher side.

1 Like
199

All, I am trying to understand different IT companies and how they are different from each other. Does anyone know how persistent is different from TCS for example other than size and scale? Does all service companies do similR work?

200

Persisten was mostly into product engineering services likes of Tata Elxsi , KPIT but focused on software products more. After there new CEO they are now focusing on expanding IT services esp manage services, cloud, analytics, sales force etc in Industry like Health care and BFSI. Most of IT company have strong areas so none of them are alike. TCS, Infosy and HCL all play in different strenght areas like verticals or services. Offlate many IT services companies have stopped giving services break up so it becomes difficult to build understanding. but generally there sales follow similar pattern or cycle.

2 Likes
201
2 Likes
202

This is not so good area to invest they also paid 3 times sales for a stagnant business , why again start investing in product businesses but overall this acquisition has no significance

1 Like
203

why is basic & diluted EPS for Jun’23 quarter different in consolidated statement filed this year and last year?
in Current filing it is 15.25 & 14.87 for Jun’23 quarter
last year filing its 30.5 & 29.75

204

ok got it thr was stock split…nseindia trendlyne doesnt update past quarters data…

205
1 Like
206
207

Unlocking Potential: How Pi-OmniKG is Set to Revolutionize Biomedical Research and Drive Revenue for Persistent Systems

Persistent Systems has recently launched Pi-OmniKG, an advanced AI-driven knowledge graph solution developed in collaboration with Google Cloud. This innovative product is poised to significantly enhance the company’s revenue potential, particularly within the healthcare and life sciences (HCLS) sectors. By addressing critical challenges in biomedical research, Pi-OmniKG not only streamlines data processing but also positions Persistent Systems as a leader in the rapidly evolving landscape of digital engineering and enterprise modernization.

The Value Proposition of Pi-OmniKG:

Pi-OmniKG is designed to tackle the inefficiencies associated with traditional biomedical research workflows. Researchers often face obstacles due to legacy systems that struggle to integrate and analyze diverse datasets effectively. This results in delays in generating actionable insights, which are crucial for drug discovery, clinical research, and patient care. Pi-OmniKG addresses these challenges by modernizing data integration processes, enabling organizations to create a comprehensive knowledge base that deciphers complex relationships among various data sources.

Key Benefits of Pi-OmniKG:

  • Accelerated Research: By reducing the time required for hypothesis generation, researchers can make faster, evidence-based decisions.

  • Enhanced Data Processing: The solution speeds up data processing, leading to improved research efficiency.

  • Unified Knowledge Base: It seamlessly integrates diverse data types from both public and private datasets, creating a holistic view of information.

  • Intuitive Interface: Researchers can query and visualize data easily, uncovering novel relationships and delivering high-quality insights backed by authentic citations.

Market Dynamics:

The global market for biomedical research tools is experiencing robust growth, driven by increasing demand for innovative solutions in healthcare. As of 2023, the life science tools market is estimated to be worth between $122 billion and $158 billion, with projections indicating it could reach approximately $455 billion by 2033, growing at a compound annual growth rate (CAGR) of about 10.9%.

Several factors contribute to this growth:

  • Rising Disease Prevalence: The increasing burden of chronic diseases necessitates accelerated drug discovery and development processes.

  • Technological Advancements: Innovations in AI and data analytics are transforming how researchers approach biomedical challenges.

  • Investment in Healthcare: Significant investments from both public and private sectors are fueling advancements in life sciences research.

Competitive Landscape:

It’s a highly competitive environment with established players like Thermo Fisher Scientific, Agilent Technologies, and Illumina. These companies have substantial market shares and brand loyalty. However, Pi-OmniKG’s unique capabilities—powered by Google Cloud’s GenAI technologies—provide Persistent with a distinct advantage in offering tailored solutions that meet the evolving needs of HCLS organizations.

Revenue Potential:

The introduction of Pi-OmniKG is expected to drive significant revenue growth for Persistent Systems. By targeting healthcare organizations and pharmaceutical companies that require efficient data management solutions, the company can tap into a lucrative market segment. The potential revenue streams include:

  • Software Licensing Fees: Organizations will pay for access to Pi-OmniKG’s capabilities.

  • Consulting Services: Persistent can offer tailored consulting services to help clients implement and optimize the use of Pi-OmniKG.

  • Subscription Models: Ongoing support and updates can be monetized through subscription-based models.

Given the projected growth of the life sciences tools market and the increasing reliance on AI-driven solutions, Persistent Systems stands to gain a substantial share of this expanding market.

Potential Risks:

While the prospects for Pi-OmniKG are promising, several risks could impact its success:

  1. Market Competition: The presence of established competitors may pose challenges in gaining market share quickly.

  2. Technological Dependence: Reliance on Google Cloud’s technologies means any issues or changes in their offerings could affect Pi-OmniKG’s performance.

  3. Regulatory Challenges: The healthcare sector is heavily regulated; any changes in regulations could impact product deployment and acceptance.

  4. Adoption Rates: The success of Pi-OmniKG depends on how quickly organizations adopt new technologies; resistance to change could slow down its market penetration.

Conclusion

The launch of Pi-OmniKG represents a strategic move for Persistent Systems to enhance its revenue potential while addressing critical challenges faced by biomedical researchers. With its innovative features and alignment with market needs, this product positions Persistent as a key player in the life sciences sector. While there are risks associated with competition and regulatory landscapes, the overall outlook remains positive as demand for advanced biomedical research tools continues to grow. By leveraging its partnership with Google Cloud and focusing on delivering high-value solutions, Persistent Systems is well-equipped to capitalize on this opportunity and drive significant revenue growth in the coming years.

1 Like