Sagility India Ltd. has received a 'buy' rating from Kotak Securities Ltd. as the brokerage initiated coverage on the stock, with a target price of Rs 56. The brokerage projects a 24% upside in the stock from current levels.
Kotak Securities highlighted that the company has scope of enhanced platform capabilities and better scale-up of new clients. "Healthy margin profile; near term profitability pressure likely," it added.
The brokerage noted that, the company is adapting well to broader shift across Industries to outcome-based engagements.
The brokerage expects 10.7% organic revenue CGR over FY2025-28E, similar to organic revenue growth in the past three and five years periods. "Our estimates bake in benefits from secular drivers-increased outsourcing and offshoring by healthcare payers," it noted
Kotak further expects some drag in the near term due to volume discounts extended to clients to offset business pressures from increased medical costs.
Kotak Securities further shared that the higher offshore revenue mix translates into better profitability for the company. "We expect some near-term pressure on margins due to the consolidation of the onsite-centric acquisition and likely higher efficiency passed on to clients facing business pressures," it added.
The brokerage expects adj Ebitda margin to decline by 200 bps to 23.3% and gradually improve to 24.2% by FY2028.
Key risks include higher dependence on a set of clients to scale up the business has resulted in increased client concentration. Further, Sagility faces likely margin pressures due to pricing and volume discounts to clients in addition to general sector risks.
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