BSE Code: | NSE Code: | ISIN: | Sector:
Research Report Detail
|Report Date||Call||Price@Call||Target Price
|Current Status||Time Horizon|
|Open|| Long (1Y)
HDFC Securities maintains buy on Sonata Software
Sonata delivered robust numbers in 1QFY18, International IT services (IITS) revenue grew 6.5% QoQ to USD 32.7mn ahead of our estimate of USD 31.0mn.Positive take away was recovery in OPD (30% of rev, 10.4% QoQ) and Travel (28% of rev, 10.5% QoQ). Sonata is now a preferred vendor for 'Microsoft ISV Development Center', which will drive growth in OPD vertical. Total Revenue stood at Rs 6.35bn down 10.4% QoQ led by weak Domestic Product & Services (DPS) revenue (Rs 4.34bn, -15.2% QoQ). Management is aiming of double growth in IITS business (around 3% CQGR), led by OPD, Retail (Brick & Click Platform) and Travel (SAP Hybris and Rezopia) vertical. We expect IITS USD revenue to grow 13.0/13.5% in FY18/19E; IITS margin will be in the range of 17-18%. We like Sonata's IP-focused business model, quality balance sheet (Net cash of Rs 34/share, around 21% of Mcap), high RoE (around 30%), high dividend yield ( around 6.0%) and reasonable valuations.