⚠ Disclaimer: This report is generated using AI tools and is for informational purposes only. It does not constitute investment advice. Please consult a registered financial advisor before making any investment decisions.
SONATSOFTW - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 3.6
| Stock Code | SONATSOFTW | Market Cap | 8,811 Cr. | Current Price | 313 ₹ | High / Low | 569 ₹ |
| Stock P/E | 45.6 | Book Value | 28.6 ₹ | Dividend Yield | 1.40 % | ROCE | 30.6 % |
| ROE | 28.4 % | Face Value | 1.00 ₹ | DMA 50 | 344 ₹ | DMA 200 | 387 ₹ |
| Chg in FII Hold | -0.06 % | Chg in DII Hold | -0.03 % | PAT Qtr | 147 Cr. | PAT Prev Qtr | 22.7 Cr. |
| RSI | 35.3 | MACD | -11.8 | Volume | 3,32,536 | Avg Vol 1Wk | 4,14,745 |
| Low price | 286 ₹ | High price | 569 ₹ | PEG Ratio | -14.7 | Debt to equity | 0.16 |
| 52w Index | 9.50 % | Qtr Profit Var | -10.8 % | EPS | 6.90 ₹ | Industry PE | 23.9 |
📊 Core Financials
- Quarterly PAT at 147 Cr vs 22.7 Cr previously, showing strong sequential recovery but YoY decline (-10.8%).
- ROE at 28.4% and ROCE at 30.6% reflect excellent capital efficiency.
- Debt-to-equity ratio at 0.16 indicates low leverage and financial stability.
- EPS at 6.90 ₹ provides a modest earnings base, though growth momentum is inconsistent.
💹 Valuation Indicators
- P/E ratio: 45.6, significantly higher than industry average of 23.9, suggesting overvaluation.
- P/B ratio: ~10.9 (313 ₹ / 28.6 ₹ book value), showing premium pricing.
- PEG ratio: -14.7, negative due to declining earnings, highlighting valuation risk.
- Intrinsic value appears lower than current price, limited margin of safety.
🏢 Business Model & Competitive Advantage
- Sonata Software operates in IT services, digital transformation, and software solutions.
- Competitive advantage lies in strong client relationships, niche digital offerings, and global delivery capabilities.
- Exposure to IT demand cycles impacts earnings stability.
📈 Entry Zone & Long-Term Guidance
- Entry zone: 290–310 ₹ range (near recent low of 286 ₹ and RSI at 35.3, oversold zone).
- Long-term holding viable for investors seeking exposure to IT services growth.
- Accumulation should be cautious due to stretched valuations and weak earnings trend.
Positive
- Strong ROE (28.4%) and ROCE (30.6%).
- Low debt-to-equity ratio (0.16), ensuring financial stability.
- Dividend yield at 1.40% provides income support.
Limitation
- High P/E (45.6) compared to industry average (23.9).
- Negative PEG ratio (-14.7) indicates poor growth-adjusted valuation.
- EPS (6.90 ₹) remains modest relative to valuation multiples.
Company Negative News
- Quarterly profit variation shows decline (-10.8%).
- FII holdings decreased (-0.06%) and DII holdings also declined (-0.03%).
- Stock trading below 50 DMA (344 ₹) and 200 DMA (387 ₹), reflecting bearish trend.
Company Positive News
- Sequential PAT recovery (147 Cr vs 22.7 Cr).
- Strong capital efficiency metrics (ROE and ROCE).
Industry
- Industry PE at 23.9, much lower than Sonata Software’s 45.6, highlighting sector undervaluation relative to Sonata.
- IT services industry expected to grow steadily with digital transformation demand.
Conclusion
- Sonata Software is financially stable with strong returns but faces weak earnings momentum.
- Valuations remain stretched, making accumulation near 290–310 ₹ more attractive.
- Best suited for long-term investors seeking IT services exposure, but caution advised due to high valuation multiples and earnings volatility.
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