Sonata Software - Near-Term Hiccups, But Long-Term Growth Intact: Prabhudas Lilladher

Prabhudas Lilladher Report

We interacted with the CFO of Sonata Software Ltd.

The management is confident of achieving profitable growth under the new leadership, who has been growth focused, and carrying earlier exposure to leverage alliance and partnerships with product companies.

The company is rigorously chasing large deals with its mining and hunting strategy, while encouraging and incentivizing the team on winning strategic deals or accounts.

More importantly, the acquisition of Quant has given Sonata Software access to some strategic accounts, which is helping the company effectively implement the go-to-market strategy and cross-sell its full-stack offerings. Near-term volatility in the international IT service business has created a near-term margin pressure at the consolidated level, but the management is confident of balancing the margin and growth equation in the subsequent quarters.

The management has retained its aspiration to achieve revenue of $1.5 billion by FY27 (13% compound annual growth rate in FY24-27E), and $500 million for international IT service (15.6% CAGR).

The stock is currently trading at a price/earning multiple of 21 times FY27E and 25.5 times FY26E consensus.

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