Accumulate Sonata Software; target of Rs 400: Deven Choksey

Deven Choksey report on Sonata Software

Sonata Software Q2FY26 revenue declined by 2.3% YoY (-28.5% QoQ) to INR 21,193 Mn, primarily due to significant sequential degrowth which was primarily driven by the domestic business (SITL) revenue, which witnessed a degrowth of 38.8% QoQ to INR 13,913 Mn. In terms of USD, revenue declined by 6.3% YoY (- 29.9% QoQ) to 242.8 Mn, primarily driven by strong reduction in domestic business, down by 4.8% YoY (-38.8% QoQ) to USD 159.4 Mn, while the international business declined 3.1% YoY (+0.2% QoQ) to USD 82.0 Mn. In constant currency terms, IITS revenue witnessed a de-growth of 3.9% YoY (+1.0% QoQ).

Outlook

We have rolled forward our valuation to Sept’27 estimates. We value Sonata Software at 18.0x Sept’27 EPS, implying a target price of INR 400. We reiterate our “ACCUMULATE” rating on the stock.