Q3FY21 Company Update - Sonata Software - ICICI Direct

Sonata Software reported 5.1% QoQ growth in dollar revenues (US$41 million) in IT services segment mainly led by healthy growth across geographies. IT service EBITDA margin improved 451 bps QoQ to 28.9%. Domestic revenues increased 110% QoQ to Rs. 1099.4 crore and EBITDA margin declined 126 bps QoQ to 2.5%. Hence, overall revenues increased 74% QoQ to Rs. 1,396 crore and EBITDA margin declined 297 bps QoQ to 8.2%. Overall PAT declined 6% QoQ to Rs. 53.8 crore due to one-time settlement of taxation of Rs. 21.8 crore.

Valuation & Outlook

Stability in top client, expansion in commodities vertical (led by Scalable IP), upgrades in Microsoft Dynamics and traction in ISV vertical and retail are expected to drive revenues. In addition, revenues can also improve on inorganic expansion (we have not yet factored in the same) considering the healthy cash on the balance sheet. This, coupled with attractive valuation prompt us to maintain BUY on the stock with a revised target price of Rs. 480 (13x PE on FY23E EPS) (earlier target price was Rs. 390).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Sonata_CoUpdate_Feb21.pdf

Shares of SONATA SOFTWARE LTD. was last trading in BSE at Rs.406.55 as compared to the previous close of Rs. 402.4. The total number of shares traded during the day was 56909 in over 1929 trades.

The stock hit an intraday high of Rs. 414.6 and intraday low of 384.95. The net turnover during the day was Rs. 22839981.

Source : Equity Bulls

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