Sagility Receives Another Initiation — JPMorgan 'Overweight' On Stock

Sagility India Ltd. received an 'overweight' coverage initiation from JPMorgan with a 16% potential upside on structural tailwinds and deep domain expertise.

The global brokerage gave a target price of Rs 54 per share, against the previous of Rs 46.6 apiece on the National stock exchange.

The IT-enabled services firm should enjoy structural tailwinds from rising outsourcing while its deep domain expertise and solid client relationships should drive better account mining, JPMorgan said.

Sagility is a play on the US healthcare operations spending which is under-penetrated in outsourcing at 22%, the brokerage said.

Sagility can grow faster at 15% from wallet share gains as the underlying market is expected to grow at 5% along with outsourcing at a higher 9%, as per the company's prospectus, the note said. "As Sagility largely addresses non-discretionary operations spends, we expect limited volatility in its revenue growth profile versus larger IT & BPO Services peers."

The company enjoys attractive structural margins due to a higher offshore mix that should keep margins at the upper end of mid-cap peers, it said. The brokerage forecasts an 18% adjusted earnings CAGR over fiscal 2024-27. However, the reported earnings should grow at 50% from moderating deferred costs and amortization expenses, it said.

High client concentration, in-sourcing from top clients and changes in regulations impacting the US healthcare industry are among the key risks the JPMorgan's projections.

Earlier, Jefferies Equity Research initiated coverage on Sagility noting the healthcare services provider's strong positioning as a leading US-focused business process management firm, with domain expertise. 

The IPO of Sagility India was subscribed 3.2 times on its final day of bidding led by retail buyers. Retail category was subscribed 4.16 times, NII category was subscribed 1.93 times, the QIB category saw demand of 3.52 times and the portion reserved for employees was subscribed 3.75 times.

The stock has risen 59% since its listing on Nov. 12. The relative strength index was at 54.

Two analysts tracking the company have a 'buy' rating on the stock, according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 13.7%.