Sonata Software share surges 12% after falling in 7 of past 10 trading sessions

Shares of Sonata Software climbed 12 per cent in Tuesday's session amid high turnover after falling in seven of the past 10 trading sessions. The stock climbed 12 per cent to hit a high of Rs 369.65 on BSE, curtailing its one-month drop to 14.61 per cent. A total of 2.12 crore Sonata shares worth Rs 771.19 crore changed hands on NSE by 1.30 pm. 

The IT firm recently post another quarter of weak operating performance. Emkay Global in a recent note said its International IT services (IITS) revenue were below its estimate, declining 0.9 per cent sequentially in constant currency (CC) terms. IITS Ebitda margin inched up 10 basis points QoQ to 16.6 per cent, albeit below expectations. 

Sonata secured three major deals in Q1, including the $73 million TCV with a US-based TMT client. It reported total order bookings of $105 million and book-to-bill ratio of 1.28 times.

"Growth during Q1 was led by a large TMT deal ramp-up, continued strength in HLS, and demand for data and AI services. However, performance was impacted by softness in retail and manufacturing, budget pressures at a key BFSI client, and broader macroeconomic slowdown," Emkay said recently.  

"Domestic business faced the impact of a slowdown in the IT/ITeS sector, and several OEMs planned the shift to a direct engagement model for large clients. The management refrained from providing specific growth outlook, citing challenges in RMD, a large BFSI client, and macro uncertainty," it added.

Sonata remained hopeful of positive revenue growth in IITS in FY26.  It expects to achieve near-20 per cent Ebitda margin in IITS by FY26-end, led by large deal ramp-ups, improved utilization, offshore shift, and pyramid rationalization. 

"Factoring in the dismal Q1 performance, we cut FY26-28E EPS by 1-9 per cent. We retain BUY with unchanged target price of Rs 475 at 22x Jun-27E," Emkay Global said.