Persistent Systems share price plunged over 7%, while L&T Technology Services share price was flat in early trade on Friday after the IT services companies reported their Q1 results.
Both the Tier-II IT players announced their Q1 results on Thursday, July 18, along with IT major Infosys.
Persistent Systems’ net profit in Q1FY25 was down 2.8% at ₹306.4 crore from ₹315.3 crore in the previous quarter. The company’s revenue rose 5.7% to ₹2,737 crore from ₹2,590.5 crore, sequentially.
Growth was again led by the healthcare sector, which was up 16.5% QoQ. Hi-Tech declined 0.5% QoQ, while BFSI grew 5.9% QoQ. In terms of regional performance, North America and Europe grew 6.4% and 5.6% sequentially, while APAC was stable at 0.3% QoQ.
EBIT rose 2.5% to ₹383.8 crore from ₹374.4 crore, while EBIT margin improved by 50 bps to 14% from 14.5%, QoQ.
Persistent Systems’ Chief Executive Officer Sandeep Kalra said that the company has pivoted to an AI-led, Platform-driven services approach, deepening its hyperscaler partnerships and is developing a suite of innovative solutions.
The order booking for the quarter ended on June 30, 2024, was at $462.8 million in Total Contract Value (TCV) and at $337.3 million in Annual Contract Value (ACV) terms.
On the other hand, L&T Technology Services reported a net profit of ₹313.6 crore in the first quarter of FY25, registering a decline of 8% from ₹340.9 crore in the previous quarter. The company’s revenue in Q1FY25 fell 3% to ₹2,462 crore from ₹2,537.5 crore, QoQ. Revenue in dollar terms declined 3.3% to $295 million from $305.1 million sequentially.
EBIT during the June quarter decreased 10.4% to ₹383.6 crore from ₹428.2 crore in the March quarter, while EBIT margin contracted by 130 basis points (bps) to 15.6% from 16.9%, QoQ.
The company’s management attributed the weak performance to SWC seasonality and completion of a project in North America.
“While LTTS maintained FY25 revenue growth guidance of 8–10%, we find it a stretch given a high ask (4–5% CQGR) for the next three quarters. We are cutting FY25E/26E by -5%/-6% on lower growth,” said Nuvama Institutional Equities.
The brokerage firm maintained a ‘Hold’ rating on L&T Technology Services shares and raised the target price to ₹5,050 per share from ₹4,970 earlier.
“We remain positive on the LTTS story, as we see its strong fundamentals, impressive clientele and capabilities across segments help it deliver strong earnings growth over next three years. In the near term however, we remain cautious on the entire ERD space, given the likely impact of slowdown/recession in US/EU on the discretionary spend based ERD business,” Nuvama Equities said.
Brokerage firm Motilal Oswal lowered its FY25 EPS (Earnings Per Share) estimate by 4% on account of lower margins, but kept FY26 EPS estimate intact.
“Digitization is boosting spending in ER&D, and LTTS should benefit due to its strong capabilities, multi-vertical presence, and solid wallet share. We expect the company to deliver strong revenue growth over the coming years. We expect industry spending to improve vs. the preceding five years,” Motilal Oswal said.
The brokerage firm retained its ‘Buy’ rating on the stock with a target price of ₹5,950 per share, implying 38x FY25E EPS.
At 9:30 am, L&T Technology Services shares were trading 0.96% lower at ₹4,798.65 apiece, while Persistent Systems shares were down 5.83% at ₹4,607.35 apiece on the BSE.
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