Sonata Software, Aptus Value, Alkyl Amines, TeamLease Services Q2 Results Review: HDFC Securities

HDFC Securities Institutional Equities

Sonata Software - Deal wins to drive growth

Sonata Software Ltd. posted a good quarter with revenue growth of 1.5% QoQ constant currency and a margin decline of ~50 bps QoQ, which were in line with our estimates. The revenue growth was led by BFSI (retail banking) and TMT verticals (Microsoft sell-to and Fabric).

We expect IITS to be back on the growth trajectory based on healthy deal wins and a strong book-to-bill of 1.23 (total contract value of $104 million).

The deal pipeline has increased ~5% QoQ, and ~49% of the active pipeline consists of large deals, with over 36% of the large deal pipeline involving Fortune 500 clients.

The company won three large deals from-

1. a TMT client in the US for consumer experience modernisation,

2. a data modernisation deal with a large US commercial bank, and

3. a cloud modernisation deal from a retail client in the US.

The key growth bets for the future are Microsoft Fabric ($91 million pipeline) and Gen AI ($67 million pipeline), along with investment in the BFSI and healthcare verticals.

The company maintains its FY27 revenue aspiration of $1.5 billion ($500 million for IITS) and an Ebitda margin in the low 20s for the IITS business.

We cut our EPS estimate for FY26/27E by 1.8/1.2%, factoring in near-term margin challenges. We maintain our Add rating with a target price of Rs 690, based on 26 times Dec-26E EPS. The stock is trading at a P/E of 27/23x FY26/27E EPS and generates an RoE of ~36%.

Alkyl Amines - Volume focus—price stability ahead

We maintain Sell on Alkyl Amines Chemicals Ltd. with a price target of Rs 1,793 owing to-

1. capacity addition in methylamines and its derivatives by domestic players,

2. continued aggressive dumping by Chinese manufacturers in ethyl amines, which shall limit volume growth and expansion in margins.

We expect Ebitda/adjusted profit after tax to grow at a CAGR of 19/22% over FY24-27E and RoE/RoCE to improve from 12.2/11.4% in FY24 to 15.6/14.8% in FY27.

Currently, the stock is trading at 56.2/46.5x FY25/26 which we believe is contextually high. Ebitda/APAT were 9/5% below our estimates owing to higher than expected raw material cost and other expenses.

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