Buy Sonata Software; target of Rs 304: Anand Rathi

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Sonata's international services revenue has shown modest improvement, with a 1.2% q/q and 1.3% y/y growth in Q2FY27, driven by AI-led engagements and improving client engagement.
  • The company's AI strategy is gaining traction, with a growing pipeline and increasing adoption of AI-native engineering services.
  • Domestic business is expected to drive medium-term growth, with a focus on expanding core reselling, multi-cloud managed services, and enterprise IT services.
  • Margin recovery is expected, driven by revenue growth, operating efficiencies, and a focus on high-margin services.

Thesis Validation Checklist

  • Investors should watch for signs of continued growth in AI-led engagements, improving margins, and successful execution of the domestic growth strategy.
  • Key risks include further large-account ramp-downs, delayed AI-led deal conversion, and prolonged enterprise decision cycles.
  • The company's ability to monetize its AI investments and achieve its margin aspirations will be critical to the investment thesis.