Sonata Software has lost 30% of investor wealth since October ’21, up 350% in 5 years

Shares hit 52-week high 1,025 on October 20, 2021, since then it has fallen to 31 percent of its current market value 701. It also touched its 52-week low 610 in June 2022.

In the last 1 year, the stock has lost 8 per cent and in 2022 so far it is down about 20 per cent. However, on the back of strong June quarter earnings, the stock has gained 5 per cent so far in July.

Sonata is primarily engaged in the business of providing Information Technology (IT) Services and Software Solutions. It provides solutions for travel, rail and airline companies by integrating technologies such as omni-channel commerce, mobility, analytics, cloud and enterprise resource planning.

peers

Despite a decline of 8 percent in the last 1 year, Sonata Software has been the top performer among its peers. among peers, Firstsource Solutions The biggest fall, it lost almost half of its investor wealth in the last 1 year. Meanwhile, Root Mobile is down 43 per cent, Tanla Platforms 37 per cent, Happiest Minds 33 per cent, Mastek 20 per cent and Cycent 19 per cent in the last one year.

revenue

Sonata’s consolidated net profit up 24 per cent year-on-year for the June quarter 107.80 crore as compared to 86.70 crore in the year-ago period. Sequentially, profit was up about 7% 100.90 crore in the March quarter of FY 22.

Its consolidated revenue also jumped 40 percent year-on-year 1,778.90 crores in Q1FY23 as compared to 1,268.50 crore in the previous corresponding quarter. It grew 22 percent sequentially against revenue 1,463.60 crore in the quarter ended March 2022. The consolidated EBITDA of the firm also increased by 24% YoY during the quarter under review 159.80 crore, as against 129.10 crore in the quarter ended June 2021, and 4 per cent on a QoQ basis.

Following the earnings call, the company said talent management remains a key focus. “The Comprehensive Talent Plan includes initiatives such as employee training and development, engagement and retention, as well as capacity building for future growth and upgrading existing talent capabilities.”

In addition, the Board of Directors has also announced a bonus issue in the ratio of 1 equity share for 3 shares held in the company.

What should you do now?

Brokerage house Anand Rathi remains bullish on the stock with a ‘buy’ call. However, this reduced the target price of the stock to to 880 per share 1,020 ago. The new target price indicated the potential for the stock to rise by 25 percent in 12 months.

“Sonata’s IT services revenue growth this quarter was in line with the industry. In Q1 FY23, it grew 2% sequentially due to heavy cross-currency headwinds compared to some of its peers. This compared to the industry for the past four years. The brokerage, in its report, delivered 5 per cent QoQ on a quarterly and constant currency basis. The company said demand is strong but supply-side challenges are a matter of concern.

The brokerage noted that Sonata’s margin was 22.4 percent, 63 bps down QoQ absorbing management costs, wage increases and cross-currency. Margin outlook was more positive on the back of growth and rupee depreciation, and despite the recruitment of further sales, adding that India business delivered higher growth.

The brokerage expects Sonata’s IT Services division to register a CAGR of 17 per cent during FY 2012-24, as against a 55 per cent growth in FY14 revenue over FY12. The domestic business will register 24 per cent CAGR in FY22-24, focusing only on margins and RoE, it predicts.

“Sonata is seeing strong growth in its domestic revenue and margins, outpacing the competition. In particular, there has been a sharp reduction in working capital and increased ROE, making the case for a higher multiplier for the domestic business. has emerged, while an amount- parts approach to the two businesses,” it said.

However, taking a contrasting view, another brokerage house Prabhudas Lilladher has ‘deposited’ the stock as it believes that revenue growth in the IT Services division will remain modest as it may take 2-3 quarters. likely to take time. Due to the removal of supply side bottlenecks and the potential impact of a weaker macro environment.

Margins are also expected to remain under pressure due to investments in freshers, sales teams, growth centers and leadership teams in Canada, Ireland, Mexico, it added. It also pointed out that growth in the quarter was impacted by supply-side constraints, project-specific delays and cross-currency headwinds.

However, the brokerage raised its target price from 704 694 before. However, this means almost zero percent above the current market price. 701 (on 27 July).

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of MintGenie.

This story was first published on mintjini and can be reached Here,

first article