Target: ₹ 400

CMP: ₹ 390.40

Sonata Software has positioned itself as a differentialized modernisation engineering and ai-driven organization aiming for top -Quartile Growth.

However, bfsi is facing sustained pressure from one large us banking client, which after seasonal weakness in q4fy25 continues to grapple with budgetary constraints and constrolls Through Q1fy26, with further Impact Expected in Q2 and Q3, Keeping Discretionary Spending Mute.

While Core Banking Operations Remain Stable and New Client Additions Support Bfsi Growth, The Performance of this Key Clouds The Near-Term Outlook. Retail and manufacturing also remain under stress from global softness, tariffs and regulatory changes, with recover likely to be gradual and dependent on Global Macro Conditions. These headwinds are expected to weigh on the overall growth profile in the near term, despite healthy large deal ramp-ups and a strong pipeline.

Ingtrast, healthcare and life Sciences have stabilized from earlier client-specific challenges, with growth now driven by paharmacy and health tech platforms Built on Moderte Technology and Ai.

Sonata Aims for 18 per cent IITS Ebitda Margin By FY26E (Wage Hike in Q2 and Q3), Driven by Revenue Stabilisation, ANSTE-Offshore Mix and Better Utilization. Overall, the growth engine appears to be under stress, and we expect fy26e to be a mute year, with IITS Revenue/Consolidated EPS Cagr of 7/13 Per Cent Over fy25-28e. Considering the Near-Term Growth Challenges and Slow Margin Recovery, We Cut Our Eps Estimates by 7-8 per cent. We maintain add with a sotp-based target price of ₹ 400, Valuing the IITS Business at 22x and the DPS Business at 15x.

Published on September 17, 2025