Book profits on Sonata Software: Kotak Securities

7298 Investors following Sonata. Share this News with them.

0

Like this story, share it with millions of investors on M3

Book profits on Sonata Software: Kotak Securities

Broking house, Kotak Securities is bearish on Sonata Software. It has recommended to book profits on the stock.

Post your opinion here

 

0

Tweet

Share on Tumblr

Broking house, Kotak Securities is bearish on Sonata Software . It has recommended to book profits on the stock.

The Kotak Securities report on Sonata Software:

Scale ups in existing clients

"TUI, which has been a major client for the company, of late, had seen a substantial scale up in 3QFY06. Revenues from UK have grown at a good pace and these revenues are expected to stabilize at the current levels. However, the company has not been able to make any headway in the German operations of TUI, for which it has been trying for a long time."

"In case of Symantec, we had shared the management's optimism that Sonata could have further opportunities for providing cross platform integration services and also broadening the scope of its relationship with the erstwhile Veritas, post its acquisition by Symantec. Veritas has its own in-house off shoring facility in Pune. However, we are yet to hear about any significant wins in this area."

"In case of MicroSoft, the company continues to see scale up, but the extent of the scale up is below expectations."

"In case of Oracle, we were expecting some projects for Sonata, post Oracle's acquisition of PeopleSoft. However, there have been no announcements in this aspect. The company is working with Oracle for implementation of, migration to and re engineering of Oracle applications. One of the projects on which Sonata is working on is the customization and implementation of the HRMS package. Post the acquisition of PeopleSoft by Oracle; the prospects of the project are unclear. The company though expects stability on that front for at least one year."

New clients

"During the previous quarter a new facility was put in place for a large computer manufacturer in Hyderabad. Till Q3FY06, 25 people had started working on this account and there has been no addition to this till date. As far as another major potential client is concerned, while the company had signed the MoU in the previous quarter, it is yet to ink any contracts for this customer."

Employee addition

"Sonata had added 153 employees during 3QFY06, taking its employee base upto 1549. In 4QFY06, there has not been any significant addition till date."

In the absence of visibility

"We believe that, after posting strong quarterly growth over the past several quarters, Sonata will require to sign on more long term deals in order to sustain the growth momentum."

"While the management is focused on this aspect, the lack of announcements of any major projects has us worried."

Recommend booking profits on the stock

"We are concerned about the future prospects of the company because of the longer than normal delays in bagging new projects. In case the company is not able to close these, the growth in revenues and profitability may be impacted and the risk profile of the stock may change."

"In that case, our financial projects may be required to be changed from their existing levels. Thus, we turn cautious on the stock and recommend booking profits on the stock."