Persistent Q2: EBIT 15% fails 16% gate; hold, no add

PERSISTENT [***** trades at Rs 5,989.10 at 12:11 PM IST today on StockGro, against Rs 5,994.67 on the previous close. That is 37 percent above my Rs 4,358 exit, and 3.5 percent above the Rs 5,787.82 StockGro close on 14 October, when I last posted. Q2 FY27 results came out after market hours on 15 October. Net profit was Rs 351.5 crore, down 25.4 percent year on year and down 27.2 percent on the quarter. Revenue was Rs 4,663.9 crore, up 30.3 percent, with constant-currency growth of 20.8 percent. Total contract value was $633.5 million. The EBIT margin was 15 percent, down from 16 percent in Q1. My 3 October post set the turn condition at a Q2 EBIT margin of 16 percent or better, and my 14 October post added an equity raise of $150 million or less. Both have failed. The margin is 15 percent. Shareholders have approved an equity raise of up to $450 million, within a $1.25 billion borrowing cap, to fund the Nagarro deal, and the company holds about 94 percent of Nagarro. My view: hold for holders, no fresh money. The Q2 print fails both tests I set, and the price has moved well above my levels. A high multiple on a weak margin is not a reason to add. My exit is a close below Rs 4,358, the 29 June deal-day close, unchanged. Nothing in the result triggers it. Disclosure: Vijay Kumar Gupta, SEBI Registered Research Analyst, INH000020226, Vijay Gupta Advisory. SEBI registration and NISM certification do not guarantee performance or assure returns. Securities markets are subject to market risks. No holdings in the subject company.