Prabhudas Lilladher has given Buy recommendation for Sonata Software with a target price of Rs. 994 in its research report issued on Oct 20, 2021

Prabhudas Lilladher’s research report on Sonata Software

International IT Services (IITS) revenue came at $49.4 mn, +11% QoQ USD, 26.7% YoY USD above our estimate of $48.06 mn, +8% QoQ USD. Organic growth was also robust at 5% QoQ USD. Encore contributed $2.7 mn (2 months’ revenue post integration) vs $3mn run-rate per quarter in CY20. Growth was led by strong recovery in Retail (non-essential) + 38.9% QoQ USD, followed by Retail (Essential) (+8.7% QoQ USD) and ISV (+5.9% QoQ USD). Travel is recovering slowly (+4.2 QoQ USD). Domestic Product Services (DPS) business growth at +16% +YoY was lower than average ~27% YoY growth for last four quarters.


We value Sonata on 21X Sep23 EPS of INR 47.4 to arrive at changed TP of INR 994 (earlier: 936). Sonata is currently trading at 21/18X on FY23/24 earnings of INR 43/51 with Revenue/EPS CAGR of 18%/22% over FY22-24E. Maintain Buy.


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