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Home / Markets / Stock Markets /  This multibagger IT stock gets a 'Buy' rating from Anand Rathi post Q3 results
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Sonata Software's IT Services segment was strong in Q3FY22 and the growth was driven by CPG/Retail. The domestic business, which was up 32% on a yearly basis continued to shine. However, IT Services margins were flattish on a seqnential basis adjusted for forex, and after absorbing Q3 wage rises.

Domestic brokerage and research firm Anand Rathi has a Buy rating on the multibagger stock and has revised its target price to 1,050 per share (from 1,070 earlier) after the Q3 results. Shares of Sonata Software have rallied over 118% in a year's period, from 399 level to currently hovering around 874 per share mark.

“Sonata Software’s IT business is likely to clock a 17% (organic) CAGR over FY22-FY24 and may see segment margins of around 25.6% by FY24 (FY22e 26.4%) on global delivery build out and higher wage hikes. On the domestic front, it is likely to record a 21% CAGR (comspound annual growth rate), taking the consolidated FY24e EPS to 50," the brokerage note stated.

The IT Service providing company's management expects the fourth quarter (Q4) to be flattish for travel and growth resuming in Q1FY23. Though, Anand Rathi sees supply-side disruptions in the next few quarters to be a key risk.

IT Services’ margin was flat on absorbing wage hikes via higher utilisation and steady offshoring. Ahead, utilisation may come off a little while offshoring is likely to be steady. Sonata announced wage hikes in Q4 FY22 (for certain grades) and in Q1 FY23 (for the rest) as attrition touches 22-23%, the note highlighted.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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