Moneycontrol
Get App
Last Updated : May 13, 2020 04:22 PM IST | Source: Moneycontrol.com

Hold Sonata Software; target of Rs 205: ICICI Direct

ICICI Direct recommended hold rating on Sonata Software with a target price of Rs 205 in its research report dated May 12, 2020.

Broker Research @moneycontrolcom
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

ICICI Direct's research report on Sonata Software


Sonata Software reported poor Q4FY20 results. IT service revenues in dollar terms fell 5.1% QoQ mainly due to Covid-19 pandemic and its exposure to impacted vertical like travel (down 12.7% QoQ, accounts for 23% of revenues) & retail (down 5.1% QoQ, accounts for 28% of revenues). IT service EBITDA margin also declined ~560 bps QoQ while PAT declined 22% QoQ. Overall revenues declined 25% QoQ mainly led by 33% decline in domestic product business. Overall PAT declined 19% QoQ to Rs 61.8 crore, mainly led by 22% QoQ decline in IT service revenues and one-time provision of IL&FS of Rs 12.7 crore. The DSO also increased by five days to 50 days led by an increase in DSO days in IT service and domestic segment.


Outlook


The company reported a subdued Q4FY20 performance. Further, considering its exposure to troubled verticals, we expect FY21E revenues, margins to remain under pressure. Although we expect Sonata’s partnership with Microsoft, exposure to Outsourced Product Development (26% of revenues) could boost revenue and margin, we remain cautious on company’s recovery in travel and retail vertical. Hence, we have lowered our eps estimates for FY21E and FY22E, prompting us downgrade the stock from BUY to HOLD with a revised target price of Rs 205/share.


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.




Moneycontrol Ready Reckoner
Now that payment deadlines have been relaxed due to COVID-19, the Moneycontrol Ready Reckoner will help keep your date with insurance premiums, tax-saving investments and EMIs, among others.
Get best insights into Options Trading. Join the webinar by Mr. Vishal B Malkan on May 28 only on Moneycontrol. Register Now!

First Published on May 13, 2020 04:22 pm
Sections
Follow us on