MOSL: PERSISTENT SYSTEMS (Buy)-Solutions in sight-Analyst Day Takeaways

​Persistent Systems: Solutions in sight; Analyst Day Takeaways

(PSYS IN, Mkt Cap USD0.8b, CMP INR656, TP INR780, 19% Upside, Buy)

We attended the PSYS Analyst day in Pune, where the company demonstrated its multiple solutions ready to hit the market, while also laying out its growth strategy and explaining the opportunities in Blockchain, though long drawn. Appended below are our key takeaways from the event:

• ​A suite of ready solutions to take to market: PSYS demonstrated with use cases a number of solutions that it has invested into and readied over the recent period, which is in line with its strategy of delineating revenue growth from headcount growth in the new services era. These included its solutions in IoT (Concert), Security (Sentient), clinical decisions support in Healthcare (with Partners Healthcare), Neuro - continuous risk-based authentication (in partnership with USAA). With every solution built in collaboration with a client, a ready reference will be in place to take it to more enterprises in the market; but these remain in very early stages of their sales life cycles.
  
• Market readiness and PSYS’ sales build-up: Three imperatives to scaling in the solutions continue to evolve: [1] Product readiness, [2] Market acceptance, [3] PSYS’ sales team readiness. But we likely see sales ramp up in one or multiple of these investments next fiscal.
  
• Solutions are the structural trigger to margins: PSYS’ investments in Digital, and the accompanying onsite centricity has taken its toll on margins - down from 26% (FY13) to 16% (FY17). Aspiration levels remain much higher, and, over the long term, repeat sales of pre-built solutions remains the main lever to margin expansion.