February 09, 2017 / 11:08 IST
Sonata delivered weak 3QFY17 numbers, as its International IT services’ (IITS) revenue stood at US$ 30.3mn (-2.9% QoQ), led by weakness in OPD and Travel. Adjusting for a one-off revenue and GBP impact, IITS’ growth stood at 3.5% QoQ in line with our estimates of 3.0%. IITS EBITDA margin expanded 150 bps QoQ to 23.2% (a positive surprise) led by a better revenue mix (off-shoring) and a break even in IBIS.
OutlookWe like Sonata’s IP-focused business model, scalable Microsoft Dynamics AX & Halosys platform, quality balance sheet (cash of Rs 35/share, 18% of Mcap), high RoE (30%), high dividend yield (3%) and reasonable valuations. Maintain BUY with a TP of Rs 239 based on 12x Dec-18 EPS.
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