Buy Sonata Software, target price Rs 680: HDFC Securities

HDFC Securities has buy call on Sonata Software with a target price of Rs 680. The current market price of Sonata Software Ltd. is Rs 511.8. Sonata Software Ltd., incorporated in the year 1994, is a Mid Cap company (having a market cap of Rs 7192.20 Crore) operating in IT Software sector.

Sonata Software Ltd. key Products/Revenue Segments include Software Products, Computer Software and Other Operating Revenue for the year ending 31-Mar-2022.



Financials
For the quarter ended 30-09-2022, the company reported a Consolidated Total Income of Rs 1507.09 Crore, down -16.14 % from last quarter Total Income of Rs 1797.05 Crore and up 54.30 % from last year same quarter Total Income of Rs 976.70 Crore. Company reported net profit after tax of Rs 112.71 Crore in latest quarter.

Investment Rationale
The increase in EPS estimate by 4/5% for FY24/25E, led by improving revenue and margin outlook. The target price of INR 680 is based on 18x June-24E EPS. The stock trades at a P/E of 16/14x FY23/24E (5y/10Y average P/E of 14/10x).

Promoter/FII Holdings
Promoters held 28.17 per cent stake in the company as of 30-Jun-2022, while FIIs owned 12.87 per cent, DIIs 14.97 per cent.