6 SONATSOFTW share price target reports by brokerages below. See what is analyst's view on SONATSOFTW share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
We maintain BUY on Sonata despite near term challenges. IT services (IITS) revenue was lower than est. but margin was inline. The impact on IITS will be material in 1HFY21 (-11.6% YoY for FY21E), due to issue in one large travel client and high Retail exposure (28% of rev). Sonata’s IP-led strategy and strong Microsoft partnership (Dynamics 365) will support IITS revenue. DPS impact will be lower because of high recurring licence revenue. Growth in DPS will be led by sale of higher Microsoft cloud licences. Overall, we cut our EPS estimate by 4.5/4.0% for FY21/22E. Our TP of Rs 240 is based on 9x (~30% discount to 5Y avg.) FY22E EPS.
We maintain BUY on Sonata based on strong performance in 3QFY20. IP-led strategy, strong Microsoft partnership and expansion of Microsoft D365 offerings is driving growth and aiding margin expansion in IT services business. DPS growth momentum will continue led by Microsoft and there is scope for margin expansion. We upgrade our FY22E Rev/EPS estimate by 6.1/5.1%. Our TP of Rs 422 is based on 12x (~4% premium to 5Y avg.) Dec- 21E EPS.
We like SSOF’s differentiated business model, focus on IP and platforms, high dividend yield, quality balance sheet, high RoE and no equity dilution for the past several years. We expect the Microsoft alliance to be a key growth driver going forward. Given its platform focus, investments made in IP and S&M, decent cash generation and reasonable valuation, coupled with healthy growth, we believe there exists good legroom for upside. Following the recent 12% stock price correction, the stock trades at a reasonable valuation of 11x FY21E EPS. We maintain our BUY recommendation on the stock with a Target Price of Rs395.
Scaling of IP led revenues, rising proportion of digital and enhancing Microsoft 365 capabilities through selective acquisitions are key positives. Further, healthy margin profile in IT services business (compared to Tier-II IT companies), healthy cash balance and better payout ratio (~65% of PAT) would keep its dividend yield attractive (~4.0%). This, coupled with attractive valuation (trading at 11x FY21E EPS) prompts us to maintain our BUY rating on the stock with a revised target price of | 410 (i.e. 14x FY21E EPS).
A wider customer base that is acquired over the years, offers SSL a strategic expansion potential within the existing accounts. These factors should see SSL sustain its strong growth and profitability trends. We have estimated 9% revenue cagr over FY19-21E led by strong 14% increase from IITS revenues. DPS revenues may see 5% cagr over FY19-21E along with 20bps margin expansion. Strong 9% revenues growth along with 60bps margin expansion would drive 12% cagr in PAT over the same period. We recommend investors to buy Sonata at CMP of Rs 351 and add on dips to the Rs.322 for sequential target price of Rs.394 (13x FY21E EPS) and Rs 449 (15x FY21E EPS) over the next 4 quarters.
We like Sonata’s differentiated business model, focus on IP and platforms, high dividend yield, quality balance sheet, high RoE and no equity dilution for the past several years. Given the company’s platform focus, investments made in IP and S&M, decent cash generation and reasonable valuation, coupled with healthy growth, we envisage enough legroom for further upside, despite the strong stock performance over the past year. We maintain our BUY recommendation on the stock with an unchanged Target Price of Rs420.
Rising proportion of digital, IP led revenues, and enhancing Microsoft 365 capabilities through selective acquisitions are key positives. In addition, the company has hired people in leadership position to drive digital revenues. We believe this will be revenue and margin accretive in the long term. Further, healthy cash balance and better payout ratio (~65-70% of PAT) would keep its dividend yield attractive (~4.0%). This coupled with attractive valuation (trading at 12x FY21E EPS) prompts us to maintain our BUY rating on the stock with a revised target price of Rs 415 (i.e. 14x FY21E EPS).
We like Sonata’s differentiated business, quality balance sheet, high RoE and lack of equity dilution for last 17 years . IP business will remain the key differentiator for Sonata, which will drive IP-led revenue and boosting pricing power. ‘Platformation’ strategy we believe will take some time before its effects are seen in the form of stickier client relationships and higher contract value. We expect the Microsoft alliance to be the key growth driver, going forward. Sonata has already carried out 2 acquisitions recently through internal accruals. We expect Sonata’s acquisitive streak to continue. We maintain our BUY recommendation on the stock with a target price of Rs 420.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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