Dalal & Broacha initiates coverage on Sonanta Software, sees an upside potential of 48%
Sonata's emphasis on platform-based services, particularly with Microsoft Dynamics, caters to a growing industry demand, boosting revenue through licenses and fueling the company's overall growth.
Domestic brokerage firm Dalal & Broacha has initiated coverage on with a buy call and a target price of Rs 919 on the back of increasing revenues and a substantial deal pipeline among other reasons.Sonata's focus on platform-related services, particularly those based on Microsoft Dynamics, demonstrates a strategic alignment with industry needs, which not only generates substantial revenue through licence sales but also provides a strong foundation for Sonata's growth.
Collaborating closely with Microsoft, Sonata has been at the forefront of initiatives such as Microsoft Fabric. It is among the seven global launch partners. These cutting-edge technologies have proven instrumental in securing key deals for Sonata.
Microsoft serves a dual function, as a direct customer, contributing 20% of revenue, and as a strategic partner for implementation services, comprising roughly 30% of business.
Together, Microsoft's engagement represents a substantial 50% of Sonata's international operations, highlighting the profound influence of this partnership on Sonata's global footprint.
Sonata has a substantial pipeline of approximately $65 million in Artificial Intelligence (Al) projects. It expects 20% of its revenues to come from Al services in the next 3 years.
“Sonata's approach to securing large deals, integrating acquisitions, and expanding its client base underscores its commitment to growth and innovation. The company's efforts in leveraging Al and new technologies like Microsoft Fabric position it well to continue delivering exceptional value to its clients and achieving significant revenue growth in the coming years,” said Dalal & Broacha in its report.
Additionally, the domestic brokerage firm stated that the acquisition of Quant Systems represents a strategic move to enhance Sonata's offerings and revenue streams.
“Despite facing challenges in Q1 due to softer demand from Quant's banking customers, the integration process with Sonata appears promising. The anticipation of significant growth from Q2FY25 onwards, especially in the BFSI vertical, suggests positive momentum for Sonata's expansion,” said Neel Nadkarni of Dalal & Broacha.
The shares of Sonata Software closed flat at Rs 616.15 on Thursday.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Source: Stocks-Markets-Economic Times
