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• Outlook for FY25E: The management expects to maintain top quartile growth around similar levels as FY24 amidst the challenging micro environment. Growth to be driven by Healthcare and Life Sciences sector followed by BFSI sector and lastly Hi-tech sector. The Healthcare sector is broken into pharma/biopharma, scientific instruments, medical devices, payer and providers etc. where they are working on building AI/ML solutions. It is focussed on things like the payer-provider ecosystem within Healthcare and Life Sciences space. Similarly within BFSI space, focus is on certain micro segments and gaining market share from large peers. In terms of geography, they are looking at a combination of Western Europe from a business perspective and Eastern Europe from a delivery perspective.
• Secular adoption of GenAI: Company continues to deliver transformative solutions for its customers, leveraging generative AI and AI at broader level. AI is opening up significant opportunities for Persistent in two broad areas, AI for product engineering and AI for the enterprises. On the engineering front, it is focusing on delivering value to its customers through productivity gains using AI and automation tools across the product development lifecycle. On the enterprise side, to accelerate GenAI powered enterprise transformation, it continues to invest and strengthen its GenAI hub so that the customers can create faster, more efficient, and secure GenAI experiences at scale, anchored by the basic principles of responsible AI.
• Margins to remain at similar levels: Operating Margins for the year came at 13.9% (-100bps YoY). Majority of EBIT decline was attributable to the investment made in building sales and marketing capacity as well as building next-gen technology assets, including in the AI domain. These investments are critical from the perspective of driving future growth.  Management expects margins to remain at similar levels in FY25E. It shall work towards improving utilization, on-site/offshore mix, and other operational efficiencies to keep moving towards their medium-term target of improving margins by 200-300bps over the next three years.

Valuation: Persistent is committed to proactively staying closer to their clients and aiding them in prioritizing their technology spend towards cost optimization and transformation. They are cognizant of the need to drive operational efficiency to continue its growth journey in future and march towards the goal of expanding its margins. We maintain our rating to BUY and arrive at a revised target price of INR3,970 implying a PE of 37x on FY26E EPS of INR107.

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