SONATSOFTW - Investment Analysis

Last Updated Time : 02 Aug 25, 12:58 am

Investment Rating: 4.1

📊 Fundamental Analysis

Strengths

ROE (27.3%) & ROCE (29.1%): Exceptional returns on equity and capital employed, indicating strong operational efficiency.

Low Debt-to-Equity (0.30): Financially sound with manageable leverage.

P/E (26.9): Slightly below industry average (29.1), suggesting fair valuation.

Consistent EPS (₹15.1) and solid dividend history (1.08% yield).

Global Reach: Strong presence in the U.S., Europe, and Asia with diversified IT services.

Concerns

PEG Ratio (6.54): Indicates overvaluation relative to earnings growth.

Decline in FII/DII Holdings: Institutional sentiment has weakened.

Quarterly PAT Decline (-2.56%): Margins under pressure due to sector headwinds.

Trading Below DMA 50 & 200: Weak technical momentum.

📉 Technical & Trend Analysis

RSI (40.0): Approaching oversold territory, but not yet a reversal signal.

MACD (1.20): Mild bullish crossover, but lacks strong momentum.

Volume: Slightly above average, indicating some accumulation.

Price Trend: Down ~47% from 52-week high; currently consolidating near support.

💰 Ideal Entry Price Zone

Accumulation Zone: ₹370–₹395

This range aligns with historical support and offers a favorable risk-reward ratio.

Wait for RSI to dip below 35 or MACD to turn strongly positive for confirmation.

🧭 Exit Strategy / Holding Period

If you already hold SONATSOFTW

Hold for 3–5 years if you believe in the long-term digital transformation story.

Exit partially if price rebounds to ₹525–₹550 (near analyst targets) and fundamentals stagnate.

Reassess if PEG remains elevated and ROE/ROCE decline below 20%.

Long-Term Outlook

Analyst targets for 2026–2030 range from ₹1,092 to ₹2,282

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Growth in AI, cloud, and digital modernization deals supports long-term compounding.

Maintain exposure if company continues to secure large global contracts and improves margins.

Would you like a side-by-side comparison with peers like Infosys or LTIMindtree to evaluate sector positioning?

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