The price of Coforge's shares increased by 20% in three months and by over 46% in six. Over the last two years, the stock has increased by 108%. In the meantime, Persistent Systems produced 170% mutlibagger returns in just two years.
Following the release of the IT businesses' Q3 earnings, the share prices of Coforge and Persistent Systems surged up to 10% in early trading on Thursday. On the BSE, Coforge shares were locked in at ₹9,047.60 per share, 10% above the upper circuit. The price of Persistent Systems' shares on the BSE increased by 9.05% to ₹6,200.00 per.For the third quarter of FY25, Coforge and Persistent Systems, two Tier-2 IT companies, reported impressive results.
Results for Coforge Q3
In the fiscal third quarter that concluded in December 2024, Coforge reported a net profit of ₹215.5 crore, which was 6.6% higher than the September quarter.
At ₹3,318.2 crore, the company's Q3FY25 sales increase was 8.4% on a quarter-over-quarter (QoQ) basis. Revenue increased 8.4% sequentially in constant currency (CC) terms, while the topline increased 7.5% quarter over quarter to $397 million in US dollars.
EBIT improved to 9.5% from 9.4%, QoQ, and EBIT at the operational level climbed to ₹316.2 crore from ₹287.6 crore in the previous quarter.
Additionally, Coforge has agreed to pay $17.85 million to purchase a 100% interest in Xceltrait Inc.
Additionally, Coforge declared a ₹19 interim dividend per share. The date of the Coforge dividend record is set for January 30, 2025.
Results for Persistent Systems Q3
In Q3FY25, Persistent Systems' net profit increased 14% on a quarter-over-quarter basis to ₹373 crore.
In US dollars, revenue was $360.2 million, up 5% from the previous quarter. Persistent's US dollar revenue was predicted to reach $362.7 million by a CNBC-TV18 survey.
At ₹3,062 crore, the company's revenue grew by 5.7%. The growth rate of revenue in constant currency was 4.6%.
EBIT increased by 12% from the previous quarter to ₹456 crore during this quarter, and the EBIT margin increased by 90 basis points on a quarterly basis to 14.9%.
Additionally, Persistent Systems announced a ₹20 interim dividend per share.
With 19.8% YoY growth in the quarter, Persistent is the industry leader, and its FY31 estimate calls for a CAGR of almost 24% over FY25–31. With a targeted plan to scale up each of them significantly, management is making the proper moves by diversifying into new verticals and growing its present verticals into sub-verticals. Nuvama Institutional Equities stated, "The stock looks pricey at 50x FY26E PE, but we believe that is justified given PSYS's healthy growth profile (25% earnings CAGR over FY24–27E)."
The brokerage company raised its target price for Persistent Systems' shares from ₹6,350 to ₹7,000, while maintaining its "Buy" recommendation.
For Persistent Systems, Motilal Oswal expects a 19% USD revenue CAGR over FY24-27E. This, along with margin expansion, should lead to a CAGR of about 21%+ EPS. As a diversified provider of IT services and product engineering, this puts the business in a class by itself and supports a high valuation multiple.
Our projections have not changed much. The stock is now trading at a price that is undoubtedly high. Nevertheless, we think there is still potential for improvement in the price on a PEG basis because of its superior earnings growth trajectory. Persistent Systems is worth 55 times FY27E EPS, according to MOFSL.
The brokerage company maintains its "Buy" rating, aiming for a share price of ₹7,600.
Trend of Stock Prices
The price of Coforge's shares increased by 20% in three months and by over 46% in six. Over the last two years, the stock has increased by 108%.
The share price of Persistent Systems, meanwhile, has risen 28% in six months and more than 49% in a year after dropping 4% in a single month. In just two years, the IT stock has produced multibillion-dollar profits of 170%.
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