Sonata Software Q4 Results Review: IDBI Capital Maintains 'Buy' On Recent Correction, Revises Target Price

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IDBI Capital Report

Sonata Software Ltd. underperformed with a 5% QoQ decline, primarily due to sustained weakness in the Quant segment, the full-quarter impact of a client ramp-down in TMT, along with more than expected impact of ramp down which is likely to continue in Q1 FY26 but with limited subdued environment.

Management views Q2 FY26 as an inflection point, projecting a recovery backed by robust growth in Healthcare and BFS and is targeting a $250 million run-rate over the next three to five years, coupled with tailwinds of large deal ramp up (TMT and BFS) but also expects headwinds from elongated deal cycles due to continued softness especially in retail and manufacturing vertical.

Long-term growth levers include a sharpened focus on large-deal wins (1.25x book-to-bill in Q4), and strategic scaling via AI, talent, and frontline sales.

Retaining a constructive outlook, we reiterate our Buy rating (due to recent price correction), valuing the stock at 19x FY27E EPS with a revised target price of Rs 465.

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