Sonata Software shares plunge 9% post Q1 results; here's target price
Sonata Software: HDFC Institutional Equities expects the International IT services (IITS) to be back on the growth trajectory based on healthy deal wins and a strong book-to-bill of 1.24 (TCV at $103 million).
- Aug 1, 2024,
- Updated Aug 1, 2024 1:27 PM IST
Shares of Sonata Software Ltd tanked 9 per cent in Thursday's trade after the IT firm reported a consolidated profit after tax of Rs 105.60 crore, down 4.3 per cent sequentially or 12 per cent YoY. This is even as revenues for the quarter came in at Rs 2,527.40 crore, up 25 per cent YoY or 15 per cent YoY.
Sonata Software shares plunged 8.09 per cent to Rs 676.65 on BSE. HDFC Institutional Equities said Sonata Software posted a good quarter with revenue growth of 1.4 per cent QoQ CC and margin improvement of 148 basis points sequentially, which were in line with its estimates.
The revenue growth was led by BFSI (retail banking) and TMT verticals (Microsoft Fabric). HDFC Institutional Equities expects the International IT services (IITS) to be back on the growth trajectory based on healthy deal wins and a strong book-to-bill of 1.24 -- TCV at $103 million.
"The large deal pipeline is strong with 49 large deals under pursuit. GenAI and Fabric deals are gaining traction and 50 per cent of the deals in the pipeline are from cloud and data. The company won three large deals in the quarter. The management indicated that decision-making is still slow and the aspiration of $0.5 billion in services revenue by FY26E will be delayed by 2-3 quarters," HDFC Institutional Equities said.
The IITS margin range is expected to be in the range of 20 per cent. "We cut our EPS estimate for FY25/26E by 2.7/1.7 per cent, factoring near-term margin challenges. We maintain our ADD rating with a target price of Rs 685, based on 26 times June 2026 EPS. The stock is trading at a P/E of 38/29 times FY25/26 EPS," the domestic brokerage said.
Shares of Sonata Software Ltd tanked 9 per cent in Thursday's trade after the IT firm reported a consolidated profit after tax of Rs 105.60 crore, down 4.3 per cent sequentially or 12 per cent YoY. This is even as revenues for the quarter came in at Rs 2,527.40 crore, up 25 per cent YoY or 15 per cent YoY.
Sonata Software shares plunged 8.09 per cent to Rs 676.65 on BSE. HDFC Institutional Equities said Sonata Software posted a good quarter with revenue growth of 1.4 per cent QoQ CC and margin improvement of 148 basis points sequentially, which were in line with its estimates.
The revenue growth was led by BFSI (retail banking) and TMT verticals (Microsoft Fabric). HDFC Institutional Equities expects the International IT services (IITS) to be back on the growth trajectory based on healthy deal wins and a strong book-to-bill of 1.24 -- TCV at $103 million.
"The large deal pipeline is strong with 49 large deals under pursuit. GenAI and Fabric deals are gaining traction and 50 per cent of the deals in the pipeline are from cloud and data. The company won three large deals in the quarter. The management indicated that decision-making is still slow and the aspiration of $0.5 billion in services revenue by FY26E will be delayed by 2-3 quarters," HDFC Institutional Equities said.
The IITS margin range is expected to be in the range of 20 per cent. "We cut our EPS estimate for FY25/26E by 2.7/1.7 per cent, factoring near-term margin challenges. We maintain our ADD rating with a target price of Rs 685, based on 26 times June 2026 EPS. The stock is trading at a P/E of 38/29 times FY25/26 EPS," the domestic brokerage said.