Stock To Buy: This Midcap IT Stock Trading Near 52 Week High, Gained Over 30% In 3 Months

Stock Outlook- Current Market Price, 52 Week Low/High, Returns

The last traded share price of Sonata Software is Rs 720/share on NSE. It gained 1.98% as compared to its previous close of Rs 706/share. Its 52 week low is Rs 457.59/share and 52 week high is Rs 753/share. The stock is trading 4.58% away from its 52 week high.

The stock declined 2.15% in 1 week. It gave 18.83% positive return in 1 month and 30.21% in 3 months. it gained 29.9% in the past 1 year, 178.54% in 3 years, and 196.66% in 5 years, respectively.

Buy for a target price of Rs 775/share

According to HDFC Securities, Sonata Software announced its largest acquisition of Quant Systems, which involves a cash payout of USD 65mn and an earn-out of USD 95mn payable over the next two years. The deal is valued at P/S of 4.3x (1.8x excluding earnout), which we believe is on the higher side but it is justified by Quant's (1) high growth profile (3Y organic CAGR of 113%); (2) superior margin of >25%; (3) excellent partnership network (Salesforce, AWS, Adobe, Snowflakes, etc.); and (4) domain capabilities in the BFSI and healthcare verticals.

it added, The acquisition is in line with management's target to double IITS revenue (hit half a billion) in four years (organic CAGR of ~15%), supported by higher investments in new verticals and geographies and expanding partnerships beyond Microsoft. The acquisition will also add two new clients to the top-5 list of Sonata's and will help expand its presence in the BFSI and healthcare verticals.

The brokerage said, "We like Sonata based on (1) growth acceleration in IITS; (2) strong Microsoft relationship; (3) new CEO focus on improving sales engine; (4) continued growth in DPS; and (5) high RoE of >35%. The deal is EPS accretive and will boost FY24/25E EPS by +2/6% respectively. We maintain our BUY rating and increase our TP to INR 775, based on 18x Dec-24E EPS."

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.