Sonata Software Hits New 52-Week High Today: Analyst Sees Further Upside

Sonata Software’s share price surged over 5% to hit a new 52-week high of ₹934.35. Analysts at HDFC Securities see the stock going further up as the company’s International IT services (IITS) revenue beat the brokerage firm’s estimates.

The Sonata Software Analyst: The Amit Chandra-led analyst team at HDFC Securities maintained the buy rating for the stock raising the target price to ₹1,000 from ₹920.

The Sonata Software Thesis: The brokerage firm noted that the company’s IITS revenue grew 9% sequentially to $65.8 million (₹533.5 crore) higher than the firm’s estimates of around $64 million (₹510 crore). The firm said that the 15% quarter-over-quarter decline in consolidated revenue was mainly due to a decline in Domestic Product and Services revenue.

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The brokerage firm highlighted that the company won three large deals during the quarter which included one deal of USD 160mn for 10-year IT modernisation in the retail vertical. The IITS EBITDA margin
also contracted 331bps quarter-on-quarter to 18.5% due to wage and M&A costs. The firm expects the margins will continue to be under pressure due to senior management wage hikes in Q1.

The brokerage firm also increased estimates for the company’s consolidated revenue and IITS revenue by 2% and 1.9% respectively for FY24 and FY25.

Price Action: Sonata Software shares were up 4.33% to trade at ₹923.45 apiece in the late hours of trading on Tuesday.

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