IGI Logo

PSYS to drive strong differentiated growth led by Enterprise AI offerings

PSYS is pivoting towards AI driven strategy focussed on Enterprise AI offerings, which we believe would help it deliver strong differentiated growth backed by its AI powered digital engineering platform SASVA along with other AI platforms like iAURA and GenAI. The company’s consistent performance, despite macroeconomic challenges, reinforces confidence in its strategic direction towards achieving USD 2Bn in revenues by FY27. PSYS’s resilience and clientcentric approach positions it well to achieve its medium-term financial goals. We expect Revenue/EBIT/PAT to grow at a CAGR of 16.4%/23.2%/22.7% over FY25–FY28E. Given this outlook, we maintain our rating to ADD. We roll forward to FY28 estimates & consider average of FY27E & FY28E EPS of INR 151.3, implying a PE multiple of 40x (maintained) to arrive at our Target Price of INR 6,050.

PSYS reports strong Q1 for 21st consecutive quarter despite macroheadwinds

* Reported Revenue for Q1FY26 stood at USD 389.7Mn up 3.9% QoQ (vs CIE est. at USD 387.8Mn). In INR terms, revenue stood at INR 33.3Bn, up 2.8% QoQ.

* EBIT for Q1FY26 came at INR 5.1Bn, up 2.5% QoQ (vs CIE est. at INR 4.9Bn). EBIT margin was down 10bps QoQ to 15.5% (vs CIE est. at 14.9%).

* PAT for Q1FY26 came at INR 4.2Bn, up 7.4% QoQ (vs CIE est. at INR 4.0Bn).

FY27E USD 2Bn Revenue aspiration remains intact despite macro headwinds:

PSYS reported a strong Q1FY26 with TCV of USD 520.8Mn, including USD 337Mn in new bookings. Revenue reached USD 389.7Mn, reflecting 18.8% YoY growth. The company aims to achieve USD 2Bn in revenue by FY27, requiring a 19–20% CAGR, driven by healthy, profitable growth. M&A remains a key part of this strategy, with plans for tuck-in & potentially larger acquisitions in Europe to boost the region’s revenue share to 15%. Geographically, Europe led with 37.5% growth, followed by North America (17.4%) & India (18.3%). BFSI was the top-performing vertical with 30.7% growth and is expected to continue leading. Software, Hi-Tech, & Emerging industries grew 14.1%. Healthcare & Life Sciences saw a 2.1% sequential decline, attributed to onsite-to-offshore transitions & macro/ geopolitical challenges, including tariff-related supply chain impacts. Nonetheless, this vertical is expected to recover, supported by broad-based customer growth across all major categories.

EBITM expected to improve by 200-300bps by FY27E: PSYS reported a Q1FY26 EBIT margin of 15.5%, up 150 bps YoY but down 10 bps QoQ due to factors like the absence of earnout reversal, delayed ramp-ups, higher amortization, and currency headwinds, partly offset by lower ESOP costs. The company aims to improve margin by 200–300 bps by FY27 from 14.7% in FY25, focusing on profitable growth & selectively investing in capability building. We expect conservative margin expansion to 16.3% by FY27E owing to levers like pricing, utilization, and SG&A efficiency. Headcount rose to 25,340, up 746 QoQ. LTM attrition increased to 13.9% from 11.9%, though management views this as manageable & not directly tied to delayed wage hikes, which were pushed by a quarter amid macro uncertainty.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer

SEBI Registration no.: INZ 000160131