Shares of Sagility surged on Wednesday, March 25, as Nomura initiated a 'buy' recommendation over its outsourcing demand and AI efficiency efforts. The brokerage has set a target price of Rs 55 on the stock.
Sagility share price advanced 7.96% intraday to Rs 40.29 apiece. The scrip was trading 6.7% higher by 12:57 a.m.
In its latest note, the brokerage firm highlighted that Sagility portrays operational flexibility and deep healthcare domain knowledge, which helps to deliver solutions for all stakeholders.
Sagility is a healthcare-focused solutions and services provider, which secures around 90% of revenue from US health insurance companies. The ongoing outsourcing demand is fueling the healthcare provider's growth, the note said.
A shift in the outcome model is expected to support the company's growth, the note said. Meanwhile, insourcing by some clients is largely due to data privacy concerns and requirements from their customers, and has thus far been limited in scope. Additionally, recent macro developments, including Medicaid funding cuts and MR rules, have led insurance companies to move towards digital and AI-led models due to pressure on margins, which is expected to act as a tailwind for Sagility's services.
The company's expertise in the healthcare sector is expected to be a key beneficiary. A major part of its business, nearly about 30%, involves customer engagement services, which cannot be easily replaced by AI. Additionally, regulatory norms don't allow AI to make medical decisions, which means humans will continue to play an important role in these services.
The report states that technology can only handle simple queries, and complex questions will require consistent decision-making with human involvement, as CMS prohibits bots from making clinical decisions.
AI, however, is likely to significantly boost efficiency through tools such as "Agent Assist," which uses GenAl and analytics to automate workflows. Around 70-80% of the AI efficiency gains will be passed back to clients; hence, the report estimates that margins will remain stable in the medium term.
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