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Company Update | IT

December 19, 2012

Persistent
Analyst Meet Update
We attended the annual investor meet of Persistent Systems (Persistent). We remain positive on the prospects of the company as it is well positioned to benefit from the next technology wave focused on cloud, mobility, analytics and collaboration. Following are the key takeaways of the meet: Focus on emerging areas – cloud, mobility, collaboration and analytics: According to Persistent, cloud, mobility, collaboration and analytics will drive growth going ahead and will become an integral part of enterprise technology spending. Persistent currently derives ~40% of its revenues from these areas (each area contributes ~10% to its revenue). The company has been focusing and investing in these areas, which are an integral part of its 4x4x4 growth strategy (services 4 verticals – banking and finance, infrastructure and systems, lifesciences and telecom in 4 technology areas – cloud, mobility, collaboration and analytics using 4 services – IP, consulting, PES and sell-with partners). The management expects mainstream deployment of cloud computing to increase from H2CY2013. IP led revenues: Persistent has been growing its IP led revenues since the past couple of quarters and is focused in building its IP-led services portfolio through organic as well as inorganic moves. The company is targeting to draw ~20% of its total revenue from IP services as against 18% in 2QFY2013 and 14% in 1QFY2013. IP led revenues have lower margins in the initial phase due to R&D costs involved in them but the company is confident of margin expansion going forward. Sell-with partnerships: The company has sell-with relationships with companies such as IBM, Microsoft, Salesforce.com, Cisco, Samsung, etc. which is yielding results. This strategy is enabling new enterprise client wins, wider ecosystem reach and quicker/efficient execution. Outlook and valuation: Persistent’s management sounded confident of the company’s growth exceeding Nasscom’s estimate of 11-14% yoy in FY2013, despite challenging macros, citing that the deal pipeline has increased by 20-25% as compared to that in the previous quarter. Over FY2012-14E, the company is expected to record USD and INR revenue CAGR of 13.9% and 18.2%, respectively. The stock is currently trading at 10.2x and 9.1x its FY2013E and FY2014E EPS of `48.0 and `53.9, respectively. We continue to remain positive on the stock and maintain Accumulate rating on it with a target price of `540.

ACCUMULATE
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code IT 1,964 (308) 0.9 515/298 129,485 10 19,476 5,930 PERS.BO PSYS@IN

`491 `540
12 Months

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 39.0 32.1 2.6 26.4

Abs. (%) Sensex Persistent

3m 6.1 20.0

1yr 28.3 64.0

3yr 16.5 -*

Note: * Listed on April 6,2010

Key financials (Indian GAAP, Consolidated)
Y/E March (` cr) Net sales % chg Net profit % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2010 601 1.2 115 74.0 24.3 32.1 15.3 2.8 18.0 17.5 2.7 11.0 FY2011 776 29.1 140 21.5 20.4 34.9 14.1 2.6 18.7 15.2 2.1 10.3 FY2012E 1,000 28.9 142 1.5 23.2 35.4 13.9 2.3 16.9 20.2 1.6 7.0 FY2013E 1,277 27.6 192 35.5 26.8 48.0 10.2 1.9 19.0 26.1 1.2 4.5 FY2014E 1,398 9.5 216 12.3 25.2 53.9 9.1 1.6 17.9 22.1 1.0 4.0

Ankita Somani
+91 22 39357800 Ext: 6819 ankita.somani@angelbroking.com

Source: Company, Angel Research

Please refer to important disclosures at the end of this report

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Persistent | Company Update

Exhibit 2: Recommendation summary
Company HCL Tech Hexaware Infosys KPIT Cummins Mahindra Satyam Mindtree Mphasis NIIT Persistent TCS Tech Mahindra Wipro Reco Neutral Buy Accumulate Buy Accumulate Accumulate Neutral Buy Accumulate Accumulate Accumulate Accumulate CMP (`) 641 89 2,295 189 107 106 707 383 31 491 1,233 947 386 Tgt. price (`) 123 2,573 202 132 115 747 36 540 1,410 1,070 421 Upside (%) 37.5 12.1 6.6 23.5 8.2 5.7 16.5 10.0 14.4 13.0 9.2 FY2014E EBITDA (%) 18.1 19.8 30.4 17.3 15.0 18.8 17.7 16.9 10.9 25.2 29.1 18.4 20.0 FY2014E P/E (x) 13.4 8.0 13.4 9.4 8.9 10.2 9.5 10.3 5.0 9.1 16.2 9.3 13.7 FY2011-14E EPS CAGR (%) 10.1 7.8 5.6 11.6 14.5 0.7 11.6 (0.5) (2.5) 15.0 12.0 5.0 7.4 FY2014E EV/Sales (x) 1.5 0.9 2.5 0.6 0.8 1.1 0.9 0.8 0.2 1.0 3.3 1.7 1.6 FY2014E RoE (%) 22.0 22.8 23.1 14.0 19.8 22.9 19.7 12.6 14.1 17.9 29.1 21.0 17.9

Infotech Enterprises Accumulate

Source: Company, Angel Research

December 19, 2012

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Persistent | Company Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Persistent No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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Persistent | Company Update
6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai- 400 093. Tel: (022) 39357800
Research Team Fundamental: Sarabjit Kour Nangra Vaibhav Agrawal Bhavesh Chauhan Viral Shah Sharan Lillaney V Srinivasan Yaresh Kothari Ankita Somani Sourabh Taparia Bhupali Gursale Vinay Rachh Amit Patil Shareen Batatawala Twinkle Gosar Tejashwini Kumari Technicals: Shardul Kulkarni Sameet Chavan Sacchitanand Uttekar Derivatives: Siddarth Bhamre Institutional Sales Team: Mayuresh Joshi Hiten Sampat Meenakshi Chavan Gaurang Tisani Akshay Shah Production Team: Tejas Vahalia Dilip Patel Research Editor Production tejas.vahalia@angelbroking.com dilipm.patel@angelbroking.com VP - Institutional Sales Sr. A.V.P- Institution sales Dealer Dealer Sr. Executive mayuresh.joshi@angelbroking.com hiten.sampat@angelbroking.com meenakshis.chavan@angelbroking.com gaurangp.tisani@angelbroking.com akshayr.shah@angelbroking.com Head - Derivatives siddarth.bhamre@angelbroking.com Sr. Technical Analyst Technical Analyst Technical Analyst shardul.kulkarni@angelbroking.com sameet.chavan@angelbroking.com sacchitanand.uttekar@angelbroking.com VP-Research, Pharmaceutical VP-Research, Banking Sr. Analyst (Metals & Mining) Sr. Analyst (Infrastructure) Analyst (Mid-cap) Analyst (Cement, FMCG) Analyst (Automobile) Analyst (IT, Telecom) Analyst (Banking) Economist Research Associate Research Associate Research Associate Research Associate Research Associate sarabjit@angelbroking.com vaibhav.agrawal@angelbroking.com bhaveshu.chauhan@angelbroking.com viralk.shah@angelbroking.com sharanb.lillaney@angelbroking.com v.srinivasan@angelbroking.com yareshb.kothari@angelbroking.com ankita.somani@angelbroking.com sourabh.taparia@angelbroking.com bhupali.gursale@angelbroking.com vinay.rachh@angelbroking.com amit.patil@angelbroking.com shareen.batatawala@angelbroking.com gosar.twinkle@angelbroking.com tejashwini.kumari@angelbroking.com

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