KR Choksey's research report on Sonata Software
Sonata Software Ltd (SSOF) Q2FY23 performance was marginally higher than our estimate. Rupee revenue grew by ~55% YoY to INR 14,960Mn (KRChoksey est. INR 12,122Mn). Reported operating margin stood at to 9.4% and reported net profit grew by 4.6% QoQ to INR 1,127Mn (KRChoksey est. INR 1,021Mn) with margin of 7.5%. DPS posted a strong quarter(+38% YoY), supported by growth in cloud license and higher annuity revenue. In Q2FY23, IITS EBITDA margin stood at 27.4% and DPS EBITDA margin stood at 3.75% and consolidated EBITDA margin stood at 10.5%. The company has declared an interim dividend of INR 7. Growth was mainly driven on the back of Top 20 clients and has successfully added 12 new clients in Q2 & has added 19 new USD Mn clients this quarter. Management has indicated that pipeline continues to be healthy and strong through multiple new digital wins from existing and new customers.
Outlook
Our target price of INR 587 is based on 17x Mar-24E EPS with EPS CAGR of 13.4% over FY22-24E.
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