Buy Sonata Software; target of Rs 420: ICICI Direct

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

ICICI Direct' research report on Sonata Software
Sonata Software reported Q1FY19 earnings wherein international IT services revenues grew 3% in constant currency terms on account of higher contribution from IP led revenues. Services dollar revenues grew 1.1% sequentially to $37.8 million on account of currency headwinds mainly due to GBP. Consolidated rupee revenues grew 10% QoQ to Rs 688.3 crore, with international revenues growing 6.3% QoQ to Rs 257.1 crore and domestic business growing 12.5% sequentially to Rs 437.1 crore EBITDA margins witnessed a healthy performance and expanded 50 bps QoQ to 10.7% supported by 120 bps expansion in international IT services business to 26%. It was mainly driven by a decline in employee expenses as a percentage of sales (19.2% as percentage of sales vs. 20.6% in Q4FY18) Reported PAT grew 5.7% QoQ to Rs 57.4 crore.

Outlook
Scaling up of existing clients and new client addition along with expansion in Europe are expected to be the kickers of growth, going ahead. Continued traction in its IP offerings and rupee benefit would drive margins upwards and improve profitability. Hence, we expect Sonata to report PAT CAGR of 17.7% in FY18-20E. Moreover, a healthy payout ratio (~65-70% of PAT) would keep its dividend yield attractive. Currently, it is trading at attractive valuation of ~13x FY20E EPS. Hence, we maintain our BUY rating on Sonata with a revised target price of Rs 420 (i.e. 17x FY20E P/E).

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.

Read More