Sonata Software hits new high; stock zooms 20%

In past three months, the stock rallied 82% against 3.7% rise in the S&P BSE Sensex.

Sonata Software hit a new high of Rs 352, up 20% on BSE in late noon deal in otherwise weak market on back of heavy volumes.
 

At 03:18 PM; it was trading 18% higher at Rs 347, as compared to 0.45% decline in the S&P BSE Sensex. The trading volumes on the counter jumped four-fold with a combined 1.90 million shares changed hands on BSE and NSE so far.

In past three months, the stock of information technology & services firm has zoomed 82% against 3.7% rise in the benchmark index.

In last five trading sessions, it rallied 29% from Rs 273 on February 6, after the company reported 8.6% quarter on quarter (QoQ) growth in its consolidated net profit at Rs 493 million for the third quarter of 2017-18 (Q3FY18) from Rs 454 million in the same period year ago, registering 22 per cent annual growth.

Consolidated revenue for the December quarter grew 80% quarter on quarter to Rs 7.67 billion from Rs 4.27 billion in the quarter ended September 2017.

EBITDA (earnings before interest, tax, depreciation and amortization) margins declined 430 bps QoQ to 8.5% mainly on account of higher contribution from low margin domestic business in the quarter. However, international services business reported a healthy 110 bps expansion in margins to stand at 23.6%.

“Going ahead, uptick in outsourced product development (OPD) revenues and continued traction in its IP led offerings would lead to gradual scale up in revenues. Improving business mix towards high margin international services business would be the key driver for margin expansion. Hence, we expect Sonata to report profit after tax CAGR of 15.2% during FY18-20E,” analysts at ICICI Securities said in company update with ‘buy’ rating. However, the stock is currently trading above its target price of Rs 340.