scorecardresearchSonata Software stock sees a sharp recovery, up 28% in 2023 so far after

Sonata Software stock sees a sharp recovery, up 28% in 2023 so far after losing 14% last year

Updated: 22 Feb 2023, 10:55 AM IST
TL;DR.

Shares of Sonata Software gained 28% in 2023 so far. The stock also marked a new 52-week high of 753 apiece on February 20, 2023, and at the current levels, it is just 6.25% away from its all-time high of 768.67. On the financial front, the company delivered a strong performance in the December quarter, with net profit growing 20.40% YoY to 118 crore.

Post the company's Q3 numbers, domestic brokerage KR Choksey has maintained its buy rating on the stock with a target price of  <span class='webrupee'>₹</span>732 apiece.

Post the company's Q3 numbers, domestic brokerage KR Choksey has maintained its buy rating on the stock with a target price of 732 apiece.

As 2023 rolled in, Indian IT stocks made a resounding comeback after being one of the worst performers in 2022. The primary reasons for the rally were the attractive valuations and their strong performance in the December quarter.

One of the notable performers in the sector was Sonata Software, which had a remarkable turnaround, gaining 28% so far in 2023 after correcting by about 14.17% in 2022. The stock kicked off 2023 on a strong footing, surging by 7.68% in January, and continued the same rally into February and surged nearly 19% thus far.

The stock also marked a new 52-week high of 753 apiece on February 20, 2023, and at the current levels, it is just 6.25% away from its all-time high of 768.67. In the last ten years, the stock delivered a whopping return of 3,690%, moving from 19 apiece to the current position of 720.

On the financial front, the company delivered a strong performance in the December quarter, with net profit growing 20.40% YoY to 118 crore from 98 crore in the year-ago quarter.

The consolidated revenue during the quarter came in at 2,261 crore, registering a growth of 21.70% YoY and 51.36% QoQ. The operating profit stood at 156 crore, up by 18.18% YoY, while the operating profit margin came in flat at 7%.

The Company's consolidated results comprise operations of Indian and overseas subsidiaries and operate under two distinct heads International IT services (IITS) and Domestic Products and Services (DPS).

Domestic business, which accounts for more than 80% of the company's revenue, reported revenue growth of 70.5% QoQ to 1,773.6 crore, while the net profit came in at 36.3 crore, a growth of 6.5% QoQ.

The international business recorded a revenue growth of 6.3% QoQ to 489.6 crore in October-December quarter of FY23. The net profit was at 81.3 crore, registering a growth of 3.4% QoQ.

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Stock price chart of Sonata Software,

Post the company's Q3 numbers, domestic brokerage KR Choksey has maintained its "buy" rating on the stock with a target price of 732 apiece. The brokerage expects strong deal momentum across geographies, a higher focus on enterprise clients and a tailwind in managed cloud services will aid growth over the medium to long term in the future.

Sonata's Modernization Services help in building a digital business ecosystem to realize business agility, scalability, and improved efficiencies with their unique Platformation approach.

Modernization-driven solutions enabled the company to win four large deal wins from enterprise clients in the quarter, it said. 

The company added 20 new customers during the quarter from various industries (retail, BFSI, manufacturing, and travel). Sonata Software continues to focus on enterprise clients to accelerate growth across the markets it operates, the brokerage noted. 

The company continues to focus on large annuity-based managed services contracts. It is continuously evaluating acquisition opportunities with (scale) accounts to drive inorganic growth, according to KR Choksey.

Sonata Software is a small-cap IT stock with a market capitalization of 9,800 crore. The company primarily provides information technology (IT) services and solutions across the globe, including the US and European markets. The company's portfolio is made up of 30% IT services and 70% product licensing and deployment.

7 analysts polled by MintGenie on average have a 'buy' call on the stock.

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

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First Published: 22 Feb 2023, 10:55 AM IST