Sonata - Striking Gold With Digital, Software Theme: IDBI Capital Initiates Coverage With Buy

IDBI Capital Report

We initiate coverage on Sonata Software Ltd. with a 'Buy' rating and a target price of Rs 915 (valued at 30 times profit to earn FY26E earning per share. New Chief Executive Officer has enabled the company to drive strong financial performance over the past few quarters.

Sonata’s focus on investing in sales and marketing, account mining and hunting and strong platformation framework are expected to be key long term growth drivers. This has led to the company aspiring to double its international services revenues by FY27E.

We believe the company could achieve the same by FY26E (implying service revenue compound annual growth rate of 27% over FY23-FY26E).

Considering this we expect overall revenue (including domestic sales) and profit after tax to grow at a compound annual growth rate of 23% and 24% over FY23-FY26E.

Further, strength in digital, traction in large deals, tier-I hires and partnerships has prompted us to have positive view on Sonata.

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