HDFC Securities' research report on Sonata Software
Sonata delivered a decent quarter with slight miss on revenue but margin beat was a positive surprise. International IT services (IITS) revenue was up 1.1% QoQ (+3.0% CC) to USD 37.8mn, below our estimate of USD 38.5mn. IITS margin jumped to 22.2% (vs. our est. of 20.0%) due to higher IP-led revenue (+5.6% QoQ and 82% of incremental rev). The company is witnessing increased traction on the Microsoft Dynamic AX (Cloud ERP platform) and is a preferred ISV development center partner for Microsoft. Focus on IPs and Platforms is driving Digital revenue (33% of rev, +1.1/23.1% QoQ/YoY). We expect IITS’ USD revenue to grow 11/14% with margin of 21.0/21.5% in FY19/20E.
Outlook
We like Sonata IP-focussed business model, capability to scale up top-accounts, quality balance sheet (net cash of Rs 50/share, ~15% of Mcap), high RoE (~31%) and high dividend yield (~3.2%). Maintain BUY with a TP of Rs 375 based on 16x FY20 EPS.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
Read More
