Sonata Software Q3 Results Review - Quant Acquisition, AI Key Growth Drivers: IDBI Capital

IDBI Capital Report

Sonata Software Ltd. reported strong services revenues (up 3% in constant currency terms), which was better than most of the peers.

Sonata Software expects Q4 to be subdued due to softness in banking, financial services and insurance and seasonality in Quant.

However, we believe Sonata will be able to match Q3 performance. Further, it has won three large deals which has annual contract value of $12 million in Q3.

Based on this trajectory we expect large deals to contribute atleast 10% to the company’s growth in FY25E. In addition, ramp up in  technology, media, and telecom vertical, 49 large deals under pursuit and traction in Quant will drive sonata’s services topline at a compound annual growth rate of 26% and PAT at CAGR of 26% over FY23-FY26E.

Hence we maintain our FY25E and FY26E estimates.

We maintain our 'Buy' rating on the stock with a target price of Rs 915 (valued at 30 times price-to-earning FY26E earnings per share).

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