Stock in Action – Persistent Systems Ltd

Movement of the Day

Analysis  

1. The current pivot levels indicate a strong support at 7,915.52 and a resistance at 8,076.03. Considering the Fibonacci levels, the support at 7,875.41 aligns closely with the classic pivot support, emphasizing its significance. The Camarilla levels show a tight range, suggesting a consolidation around the pivot point of 7,915.52.
2. The moving averages depict a bullish trend, with the 5-day SMA at 7,905.57 consistently above the longer-term averages. The upward slope indicates positive momentum, supported by the price performance showing impressive gains of 42.16% over the last 3 months.
3. The volume analysis indicates increased investor interest, with the 3-day average volume of 34K, representing a notable 24.41% increase over the previous day. This surge in volume aligns with the recent price uptrend, suggesting strong market participation.

Probable Rationale Behind the Surge

Persistent Systems, a Pune-based IT services firm, reported a robust Q3 FY24 performance, with several key financial indicators beating estimates. The surge in its stock price & positive outlook can be attributed to the following factors:

Revenue Growth

The company's revenue witnessed a commendable 3.58% increase over the previous three months, reaching ₹ 2,498.21 crore. This growth, beating Bloomberg estimates, reflects the company's ability to capitalize on market opportunities & maintain a steady revenue stream.

EBIT & Margin Improvement 

Earnings Before Interest & Taxes (EBIT) rose by 9.77%, reaching ₹ 363.10 crore, exceeding Bloomberg estimates. The EBIT margin also increased by 82 basis points to 14.53%. This improvement underscores the efficiency of the company's operations & cost management strategies, contributing to higher profitability.

Net Profit Surge

A notable 8.68% increase in net profit to ₹ 286.13 crore, surpassing Bloomberg estimates, further strengthens investor confidence. The company's ability to convert revenue into profit reflects sound financial management & operational effectiveness.

Record High Stock Price   

The stock price soared to an all-time high of ₹ 8,716.7 apiece, driven by the better-than-expected financial results & a positive market sentiment. The market's enthusiastic response indicates strong investor interest & confidence in Persistent Systems' growth trajectory.

Dividend Pay-out & Share Split  

The company's decision to declare an interim dividend of ₹ 32 per share, along with a proposed 1:2 share split, demonstrates its commitment to shareholder value. The share split aims to enhance liquidity & make the stock more accessible to investors. Such shareholder-friendly moves often attract positive attention from the market.

Experts/Analyst Recommendations

Positive evaluations from expert’s analysts, such as HSBC's 'Buy' rating & a revised target price, contribute to the bullish sentiment. The expectations of industry-leading growth & margin expansion, along with the company's strong positioning in the digital transformation space, add to investor optimism.

Order Book & Total Contract Value

Persistent Systems achieved a significant milestone by crossing $500 million in Total Contract Value (TCV) bookings for the first time. The order booking for the quarter stood at $521.4 million, showcasing the company's ability to secure substantial deals. A robust order book is indicative of a strong demand environment & potential revenue growth in subsequent quarters.

In conclusion, Persistent Systems' surge can be attributed to its impressive financial performance, strategic decisions for shareholder value, positive market sentiment, & favorable analyst recommendations. The company's ability to navigate market challenges, secure substantial contracts, & maintain profitability positions it as a noteworthy player in the IT services sector.