RESULTS REVIEW 2QFY17

4 NOV 2016

Sonata Software
BUY
INDUSTRY
CMP (as on 03 Nov 2016)
Target Price

IT
Rs 163
Rs 192

Nifty

8,485

Sensex

27,430

KEY STOCK DATA

Bloomberg/Reuters

SSOF IN

No. of Shares (mn)

105

MCap (Rs bn) / ($ mn)

17/257

6m avg traded value (Rs mn)

28

STOCK PERFORMANCE (%)

52 Week high / low
Absolute (%)
Relative (%)

3M
5.0
6.0

Rs 186 / 126
6M
10.9
2.2

12M
5.1
1.9

SHAREHOLDING PATTERN (%)

Promoters
FIs & Local MFs

30.95
2.43

FIIs

13.76

Public & Others

52.86

Source : BSE

Amit Chandra
amit.chandra@hdfcsec.com
+91-22-6171-7345
Apurva Prasad
apurva.prasad@hdfcsec.com
+91-22-6171-7327

Core business revival

Sonata delivered robust 2Q, international IT services
(IITS) revenue growth came above our estimate
boosted by sustained revival in core business. IITS
revenue stood at US$ 31.2mn +6.8% QoQ led by
second consecutive quarter of strong growth in OPD
(+10.8% QoQ). DPS declined 35.1% QoQ due to
absence of large one-time license sale last quarter.
IITS EBITDA margin at 21.8% was impacted by higher
onsite cost, wage hike and lower contribution from
IBIS. Investments in SG&A has been margin
deterrent; management guided EBITDA% range of
20-22% for IITS business.
Management is focusing on digital (+31% of rev),
building IPs and core OPD business to push growth.
We expect USD revenue to grow at 16.9/14.0% in
FY17/18E, but at a lower margin which will improve
gradually with turn-around in IBIS.
We continue to like Sonatas IP-focused business
model, focus on scalable Microsoft Dynamics AX

platform, quality balance sheet, high RoE (35%), high

dividend yield (~4%) and reasonable valuations (9.2x
FY18E). Maintain BUY with a TP of Rs 192 based on
10x Sep-18 EPS.

Highlights of the quarter

OPD and ADM drives revenue: Digital revenue

proportion was constant at 31% (+6.8% QoQ). OPD
recovered strongly for the second consecutive quarter
and grew 10.8% QoQ. Retail/Travel grew 2.4/3.2%
QoQ, while ADM/Testing/IMS registered growth of
11.1/14.0/20.2% QoQ respectively.
Concall highlights: (1) IBIS is expected to grow from
4Q, will be EBITDA positive (2) Rezopia and platform
based testing is showing traction and (3) Attrition
increase is a concern.
Near-term outlook: We expect growth to continue in
3Q with some recovery in margins (with IBIS recovery
and onsite cost reductuion). The stock is currently
available at resonable valuations which will catch up
with growth and margin improvement.

Financial Summary
Year Ending Mar (Rs mn)
Net Sales
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)

2QFY17
5,225
506
378
3.6

2QFY16
3,984
476
384
3.6

YoY (%)
31.1
6.4
(1.4)
(1.4)

1QFY17 QoQ (%)

6,778
(22.9)
439
15.3
347
8.9
3.3
8.9

FY15
16,821
1,676
1,337
12.7
12.8
9.0
33.3

FY16
19,405
1,919
1,586
15.1
10.8
6.8
35.3

FY17E
23,744
1,971
1,596
15.2
10.7
6.6
31.1

FY18E
27,222
2,347
1,862
17.7
9.2
5.3
30.8

FY19E
31,114
2,788
2,186
20.8
7.8
4.1
30.7

Source: Company, HDFC sec Inst Research # Consolidated

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

IITS revenue came at

US$31.2mn, 6.8% QoQ higher
than our estimate of US$
30mn.

Consolidated EBITDA%
expanded 321bps QoQ to
9.3% owing to higher margins
in products (+130 bps QoQ)
while IITS business margin
contracted 72 bps to 21.8%

Margin was hit due pound

impact (Rs 42mn), IBIS (Rs
16mn) and wage hike

IBIS expected to recover from

3Q which will contribute to
EBITDA margin

Quarterly Consolidated Financials Snapshot

Particulars
IITS Net Revenues (US $mn)
Net Revenues
Inventory Costs
Employee Costs
Other Operating Expenses
EBITDA
Depreciation
EBIT
Interest Cost
Other Income
PBT
Tax
Minority Interest
APAT
E/o (Adj For Tax)
RPAT

2QFY17
31.2
5,225
3,068
1,127
523
506
22
485
13
83
554
176
0
378
0
378

2QFY16
26.0
3,984
2,088
1,008
413
476
12
464
18
111
557
173
0
384
10
393

YoY (%)
20.0
31.1
46.9
11.8
26.8
6.4
78.9
4.5
(23.8)
(24.7)
(0.4)
1.9
NA
(1.4)
NA
(3.8)

1QFY17
29.2
6,778
4,644
1,114
581
439
20
419
42
125
501
154
0
347
21
368

QoQ (%)
6.8
(22.9)
(33.9)
1.2
(10.0)
15.3
8.7
15.6
(68.3)
(33.1)
10.6
14.5
NA
8.9
NA
2.7

2QFY17
58.7
21.6
10.0
9.7
9.3
31.8
7.2

2QFY16
52.4
25.3
10.4
11.9
11.6
31.1
9.6

YoY (bps)
632
(373)
(34)
(225)
(236)
72
(239)

1QFY17
68.5
16.4
8.6
6.5
6.2
30.7
5.1

QoQ (bps)
(979)
515
144
321
309
108
211

Source: Company, HDFC sec Inst Research

Margin Analysis
Particulars
Inventory Cost % Net Revenue
Employee Cost % Net Revenue
SG&A and Other Expenses % Net Revenues
EBITDA Margin (%)
EBIT Margin (%)
Tax Rate (%)
APAT Margin (%)
Source: Company, HDFC sec Inst Research

Page | 2

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

IITS Vertical Revenue Mix

OPD continued its growth
momentum for the second
consecutive quarter

(% Contribution)
OPD
TTL
CPG & Retail
Others
Total

4QFY15
35.0%
33.0%
15.0%
17.0%
100.0%

1QFY16
34.0%
32.0%
16.0%
18.0%
100.0%

2QFY16
31.0%
31.0%
19.0%
19.0%
100.0%

3QFY16
29.0%
33.0%
21.0%
17.0%
100.0%

4QFY16
28.0%
31.0%
24.0%
17.0%
100.0%

1QFY17
30.0%
29.0%
24.0%
17.0%
100.0%

2QFY17
31.0%
28.0%
23.0%
18.0%
100.0%

4QFY15
-4.6%
14.0%
-2.9%
10.1%
3.6%

1QFY16
-2.9%
-3.0%
6.7%
5.9%
0.0%

2QFY16
-8.5%
-2.8%
19.2%
6.0%
0.4%

3QFY16
-1.4%
12.2%
16.5%
-5.7%
5.4%

4QFY16
0.4%
-2.3%
18.9%
4.0%
4.0%

1QFY17
9.8%
-4.2%
2.5%
2.5%
2.5%

2QFY17
10.4%
3.2%
2.4%
13.1%
6.8%

4QFY15
29.0%
9.0%
18.0%
13.0%
7.0%
10.0%
5.0%
3.0%
3.0%
3.0%
100.0%

1QFY16
26.0%
10.0%
19.0%
15.0%
6.0%
9.0%
5.0%
3.0%
3.0%
4.0%
100.0%

2QFY16
26.0%
12.0%
19.0%
14.0%
7.0%
9.0%
6.0%
2.0%
2.0%
3.0%
100.0%

3QFY16
24.0%
12.0%
18.0%
13.0%
9.0%
10.0%
5.0%
3.0%
4.0%
2.0%
100.0%

4QFY16
23.0%
15.0%
18.0%
15.0%
9.0%
9.0%
4.0%
4.0%
2.0%
1.0%
100.0%

1QFY17
25.0%
16.0%
15.0%
16.0%
9.0%
7.0%
4.0%
5.0%
2.0%
1.0%
100.0%

2QFY17
26.0%
18.0%
16.0%
15.0%
9.0%
6.0%
4.0%
3.0%
2.0%
1.0%
100.0%

Source: Company, HDFC Sec Inst Research

Travel recovered strongly

while Retail growth has
deteriorated since the last
two quarters

IITS Vertical-Wise Revenue Growth

(Change % QoQ; US$ mn)
OPD
TTL
CPG & Retail
Others
Total
Source: Company, HDFC Sec Inst Research

Sonatas digital revenue stood

at 31% of IITS revenue, which
was similar to 1Q proportion.
Digital is largely BI, Ecommerce, Mobility, Cloud
and Rezopia

IMS has seen a steady

increase in revenue
contribution and has become
the second largest service line

IITS Service Line Break-up

(% Contribution)
ADM
IMS
Testing
AX
BI
E-commerce
ERP
Rezopia
Mobility
Cloud
Total
Source: Company, HDFC Sec Inst Research

Page | 3

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

IITS Service Line Growth

US geography is the largest

geo for Sonata however RoW
registered a sharp increase in
growth rate

GBP exposure (travel &

consumer goods vertical) at
18% of IITS revenue and GBP
depreciation headwind ahead

(Growth %, QoQ; US$ mn)

ADM
IMS
Testing
AX
BI
E-commerce
ERP
Rezopia
Mobility
Cloud
Total

1QFY16
-10.3%
11.1%
5.6%
15.4%
-14.3%
-10.0%
0.0%
0.0%
0.0%
33.3%
0.0%

2QFY16
0.4%
20.5%
0.4%
-6.3%
17.1%
0.4%
20.5%
-33.1%
-33.1%
-24.7%
0.4%

3QFY16
-2.7%
5.4%
-0.2%
-2.1%
35.5%
17.1%
-12.2%
58.1%
110.8%
-29.7%
5.4%

4QFY16
-0.3%
30.0%
4.0%
20.0%
4.0%
-6.4%
-16.8%
38.7%
-48.0%
-48.0%
4.0%

1QFY17
11.4%
9.3%
-14.6%
9.3%
2.5%
-20.3%
2.5%
28.1%
2.5%
2.5%
2.5%

2QFY17
11.1%
20.2%
14.0%
0.2%
6.8%
-8.4%
6.8%
-35.9%
6.8%
6.8%
6.8%

4QFY15
52.0%
34.0%
14.0%
100.0%

1QFY16
51.0%
34.0%
15.0%
100.0%

2QFY16
55.0%
31.0%
14.0%
100.0%

3QFY16
56.0%
31.0%
13.0%
100.0%

4QFY16
60.0%
26.0%
14.0%
100.0%

1QFY17
61.0%
26.0%
13.0%
100.0%

2QFY17
59.0%
26.0%
15.0%
100.0%

4QFY15
-2.1%
13.6%
3.6%
3.6%

1QFY16
-1.9%
0.0%
7.1%
0.0%

2QFY16
8.3%
-8.5%
-6.3%
0.4%

3QFY16
7.3%
5.4%
-2.1%
5.4%

4QFY16
11.4%
-12.8%
12.0%
4.0%

1QFY17
4.2%
2.5%
-4.9%
2.5%

2QFY17
3.3%
6.8%
23.3%
6.8%

Source: Company, HDFC Sec Inst Research

IITS Geographic Revenue Mix

(% Contribution)
USA
Europe
RoW
Total

ADM is the biggest service

line, followed by IMS, testing
and Microsoft Dynamix AX

4QFY15
-14.2%
16.6%
9.7%
3.6%
3.6%
29.5%
29.5%
55.4%
3.6%
3.6%
3.6%

Source: Company, HDFC Sec Inst Research

IITS Geographic Revenue Growth

(% QoQ)
USA
Europe
RoW
Total
Source: Company, HDFC Sec Inst Research

Page | 4

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

IITS Onsite-Offshore Split

Onsite revenue grew at 14.5%
as compared flat growth in
off-shore; offshore proportion
at 55%

IT services revenue break-up (%)

Offshore
Onsite
Total

4QFY15
67.0%
33.0%
100.0%

1QFY16
66.0%
34.0%
100.0%

2QFY16
62.0%
38.0%
100.0%

3QFY16
58.0%
42.0%
100.0%

4QFY16
57.0%
43.0%
100.0%

1QFY17
58.0%
42.0%
100.0%

2QFY17
55.0%
45.0%
100.0%

4QFY15
-0.8%
14.0%
3.6%

1QFY16
-1.5%
3.0%
0.0%

2QFY16
-5.7%
12.2%
0.4%

3QFY16
-1.4%
16.5%
5.4%

4QFY16
2.2%
6.5%
4.0%

1QFY17
4.3%
0.1%
2.5%

2QFY17
1.3%
14.5%
6.8%

4QFY15
72.0%
28.0%
100.0%

1QFY16
72.0%
28.0%
100.0%

2QFY16
73.0%
27.0%
100.0%

3QFY16
72.0%
28.0%
100.0%

4QFY16
67.0%
33.0%
100.0%

1QFY17
70.0%
30.0%
100.0%

2QFY17
72.0%
28.0%
100.0%

4QFY15
6.6%
-3.3%
3.6%

1QFY16
0.0%
0.0%
0.0%

2QFY16
1.8%
-3.2%
0.4%

3QFY16
3.9%
9.3%
5.4%

4QFY16
-3.2%
22.6%
4.0%

1QFY17
7.0%
-6.9%
2.5%

2QFY17
9.9%
-0.3%
6.8%

Source: Company, HDFC Sec Inst Research

IITS Onsite-Offshore Growth

There were hiring of more
expensive local contractors
which dented the margins,
this will be replaced by less
expensive people after the
availability of visas. This could
be a margin lever

Top-10 accounts grew 9.9%

QoQ while non-top 10
declined by 0.3% QoQ. This is
aligned with sales effort to
focus more on large accounts

IT services revenue growth (% QoQ)

Offshore
Onsite
Total
Source: Company, HDFC Sec Inst Research

IITS Client Concentration

(% Contribution)
Top-10
Non-top 10
Total
Source: Company, HDFC Sec Inst Research

IITS Client Concentration Growth

(% QoQ)
Top-10
Non-top 10
Total
Source: Company, HDFC Sec Inst Research

Page | 5

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

IITS EBITDA, Margin Trend

EBITDA

QoQ growth (RHS)

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

29
27
25
23
21
19
17
15
13
11
9

2QFY14

Source: Company, HDFC sec Inst Research

Source: Company, HDFC sec Inst Research

IITS Vertical Mix

OPD

550
500
450
400
350
300
250
200
150
100
50

2QFY17

1QFY17

(5)

4QFY16

10

3QFY16

(1)

2QFY16

14

1QFY16

4QFY15

18

3QFY15

2QFY15

22

1QFY15

11

4QFY14

26

3QFY14

15

2QFY14

30

(%)

1QFY15

(%, QoQ)

4QFY14

(US$ mn)

EBITDA margin (RHS)

(Rs mn)

3QFY14

Revenue (US$ mn)

2QFY17

IITS Rev Growth trend

IITS Geographical Mix

TTL

CPG & Retail

Others

USA

Europe

RoW

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

Source: Company, HDFC sec Inst Research

2QFY14

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Source: Company, HDFC sec Inst Research

Page | 6

20

10

60

30

2QFY17

40

60

50

1QFY17

55

52

60

55

61

67%
70%

70%

72%

72%

73%

72%

72%

73%

73%

75%

74%

66.0%

Source: Company, HDFC sec Inst Research

1,000

64.0%
500

62.0%
0

3,139
3,111
3,144
3,147

4QFY16
1QFY17
2QFY17

2,908
2QFY16
3QFY16

2,889

1QFY16

2,896

2,837
3QFY15

Nos

4QFY15

2,746

2,575

3,500

2QFY15

1QFY15

2,445

1,500

4QFY14

2,000

2,476

2,500

3QFY14

3,000

2,477

77%

IITS Top-10 Client Contribution

2QFY14

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

68.0%

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

2QFY15

1QFY15

70.0%

56

59

4QFY14

72.0%

3QFY15

2QFY15

80

71

3QFY14

2QFY14

78.0%

1QFY15

51

60

4QFY14

70

64

74.0%

58

76.0%

3QFY14

2QFY14

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

IITS Headcount

Source: Company, HDFC sec Inst Research

IITS Debtor days

Source: Company, HDFC sec Inst Research

Page | 7

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

DPS Quarterly Revenue Trend

DPS EBITDA Margin Trend

EBITDA

(Rs mn)

5,000

(%)

Source: Company, HDFC sec Inst Research

Source: Company, HDFC sec Inst Research

DPS Headcount

DPS Debtor Days

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3,174
2QFY17

1QFY17

4QFY16

3QFY16

2,316
2QFY16

1QFY16

2,340
4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

3QFY15

2QFY15

50

1QFY15

4QFY14

3QFY14

70

2QFY14

1,000

3,556

3,438

90

3,191

2,000

3,143

2,607

110

3,000

2,840

2,070

130

4,000

2,620

3,050

150

2QFY14

Domestic business growth

declined due to absence of
one large deal which boosted
revenue last quarter. It has
now come to a normalised
level

EBITDA margin (RHS)

(Rs mn)
170

4,893

6,000

102
59

20

20

1QFY17

40

62

40

40

60

4QFY16

60

80

65

100

59

80

3QFY16

76

82
3QFY15

79

85

91
3QFY14

2QFY15

90

100

101

120

2QFY14

156

147

140

142

122
114

110

111

120

2QFY17

2QFY16

1QFY16

4QFY15

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

Source: Company, HDFC sec Inst Research

4QFY14

1QFY15

120

118

140

119

160

130

(Nos)
180

148

DPS Margin will remain in the

range of 4-5%

Source: Company, HDFC sec Inst Research

Page | 8

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

IITS Segment Estimates

IITS (Rs million)
Revenue (US$ million)
% Growth
Revenue
% Growth
EBITDA
EBITDA Margin (%)

FY15
98.3
24.1
6,067
25.5
1,513
24.9

FY16
107.8
9.7
7,068
16.5
1,843
26.1

FY17E
126.0
16.9
8,443
19.5
1,858
22.0

FY18E
143.7
14.0
9,625
14.0
2,166
22.5

FY19E
162.3
13.0
10,877
13.0
2,502
23.0

FY15
10,929
0.7
413
3.8

FY16
12,501
14.4
584
4.7

FY17E
15,501
24.0
636
4.1

FY18E
17,826
15.0
802
4.5

FY19E
20,500
15.0
1,025
5.0

Source: Company, HDFC sec Inst Research

DPS Segment Estimates

DPS (Rs million)
Revenue
% Growth
EBITDA
EBITDA Margin (%)
Source: Company, HDFC sec Inst Research

Change in Estimates
Particulars
FY17E
Revenue (Rs mn)
EBITDA (Rs mn)
EBITDA margin (%)
APAT
FY18E
Revenue (Rs mn)
EBITDA (Rs mn)
EBITDA margin (%)
APAT

Earlier estimates

Revised estimates

% change

22,897
1,886
8.2
1,537

23,744
1,971
8.3
1,596

3.7
4.5
6bps
3.9

25,874
2,198
8.5
1,758

27,222
2,347
8.6
1,862

5.2
6.7
12bps
5.9

Source: Company, HDFC sec Inst Research

Page | 9

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

Peer Valuation
Company
Mindtree
eClerx
Hexaware *
Persistent
Cyient
Zensar
KPIT
Sonata

Mcap
(Rs bn)

CMP
(Rs)

Rating

TP
(Rs)

72
62
60
52
52
45
26
17

428
1,497
198
652
462
1,006
131
163

SELL
NEU
NEU
BUY
NEU
BUY
SELL
BUY

400
1455
215
770
554
1195
125
192

FY16
32.9
89.0
13.0
37.2
29.0
69.3
14.2
15.1

EPS (Rs)
FY17E FY18E
25.5
32.0
96.3 104.5
12.7
14.8
38.1
45.5
33.3
39.5
70.0
85.9
12.0
13.1
15.2
17.7

FY16
13.0
16.8
15.2
17.5
15.9
14.4
9.2
10.8

P/E (x)
FY17E
16.8
15.5
15.5
17.1
13.9
14.3
10.9
10.7

FY18E
13.4
14.3
13.3
14.3
11.7
11.6
10.0
9.2

FY16
25.0
40.3
28.9
19.5
17.0
23.4
21.0
35.3

RoE (%)
FY17E FY18E
17.3
19.6
31.1
28.4
24.4
24.4
17.2
17.7
18.5
19.7
19.8
20.6
16.1
15.6
31.1
30.8

Source: HDFC sec Inst Research * YE Dec

Page | 10

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

Consolidated Income Statement

Year ending March (Rs mn)
Net Sales
Growth (%)
Total Operating Expenses
EBITDA
EBITDA (%)
EBITDA Growth (%)
Depreciation
EBIT
Other Income
Interest
PBT
Tax (incl deferred)
Minority Int. and associate profit
RPAT
APAT
APAT Growth (%)
EPS
EPS Growth (%)

Consolidated Balance Sheet

FY15
16,821
7.4
15,145
1,676
10.0
68.5
61
1,616
231
28
1,819
486
4
1,305
1,337
71.9
12.7
71.9

Source: Company, HDFC sec Inst Research

FY16
19,405
15.4
17,486
1,919
9.9
14.5
62
1,857
475
79
2,252
667
0
1,549
1,586
18.6
15.1
18.6

FY17E
23,744
22.4
21,773
1,971
8.3
2.7
71
1,900
466
86
2,280
684
0
1,596
1,596
0.6
15.2
0.6

FY18E
27,222
14.6
24,875
2,347
8.6
19.0
79
2,267
495
103
2,660
798
0
1,862
1,862
16.7
17.7
16.7

FY19E
31,114
14.3
28,326
2,788
9.0
18.8
89
2,700
526
103
3,123
937
0
2,186
2,186
17.4
20.8
17.4

Year ending March (Rs mn)

SOURCES OF FUNDS
Share Capital - Equity
Reserves
Total Shareholders' Funds
Minority Interest
Total Debt
Net Deferred Taxes
Long-term Provisions & Others
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP
Goodwill & Other Intangible Assets
Investments
LT Loans & Advances, Others
Total Non Current Assets
Inventories
Debtors
Cash & Equivalents
Other Current Assets
Total Current Assets
Creditors
Other Current Liabilities & Provns
Total Current Liabilities
Net Current Assets
TOTAL APPLICATION OF FUNDS

FY15

FY16

FY17E

FY18E

FY19E

105
4,179
4,284
244
(89)
19
4,459

105
4,605
4,710
1,713
(129)
162
6,455

105
5,451
5,556
1,713
(129)
162
7,302

105
6,439
6,544
1,713
(129)
162
8,289

105
7,598
7,703
1,713
(129)
162
9,449

123
2
111
0
923
1,160
73
3,107
2,639
1,019
6,838
2,496
1,043
3,539
3,300
4,459

292
910
0
658
1,860
100
3,544
3,475
810
7,930
2,655
680
3,334
4,595
6,455

339
396
463
910
910
910
0
0
0
658
658
658
1,907 1,964 2,031
100
100
100
4,684 5,370 6,138
3,496 4,205 5,046
1,136 1,183 1,237
9,416 10,858 12,520
3,281 3,748 4,268
741
785
834
4,022 4,533 5,102
5,394 6,325 7,418
7,302 8,289 9,449

Source: Company, HDFC sec Inst Research

Page | 11

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

Consolidated Cash Flow

Year ending March (Rs mn)
Reported PBT
Non-operating & EO items
Interest expenses
Depreciation
Working Capital Change
Tax paid
OPERATING CASH FLOW ( a )
Capex
Free cash flow (FCF)
Investments
Non-operating income
INVESTING CASH FLOW ( b )
Debt Issuance
Interest expenses
FCFE
Share capital Issuance
Dividend
FINANCING CASH FLOW ( c )
NET CASH FLOW (a+b+c)
Non-operating and EO items
Closing Cash & Equivalents
Source: Company, HDFC sec Inst Research

Key Ratios
FY15
1,819
(195)
28
61
(664)
(486)
562
(113)
449
26
199
112
187
(28)
609
0
(675)
(515)
159
39
2,639

FY16
2,252
(438)
79
62
513
(667)
1,802
(1,601)
201
0
438
(1,163)
1,469
(79)
1,590
0
(866)
523
1,162
(326)
3,475

FY17E
2,280
(466)
86
71
(777)
(684)
510
(119)
391
0
466
347
0
(86)
305
0
(749)
(835)
22
0
3,496

FY18E
2,660
(495)
103
79
(222)
(798)
1,327
(136)
1,191
0
495
359
0
(103)
1,088
0
(874)
(977)
709
0
4,205

FY19E
3,123
(526)
103
89
(252)
(937)
1,599
(156)
1,444
0
526
371
0
(103)
1,341
0
(1,027)
(1,129)
841
0
5,046

PROFITABILITY (%)
EBITDA Margin
APAT Margin
RoE
RoIC or Core RoCE
RoCE
EFFICIENCY
Tax Rate (%)
Fixed Asset Turnover (x)
Inventory (days)
Debtors (days)
Payables (days)
Cash Conversion Cycle (days)
Net Debt/EBITDA (x)
Net Debt/Equity (x)
Interest Coverage (x)
PER SHARE DATA
EPS (Rs/sh)
CEPS (Rs/sh)
DPS (Rs/sh)
BV (Rs/sh)
VALUATION
P/E
P/BV
EV/EBITDA
OCF/EV (%)
FCF/EV (%)
FCFE/mkt cap (%)
Dividend Yield (%)

FY15

FY16

FY17E

FY18E

FY19E

10.0
7.9
33.3
21.6
29.3

9.9
8.2
35.3
20.2
28.9

8.3
6.7
31.1
16.7
25.9

8.6
6.8
30.8
18.1
26.2

9.0
7.0
30.7
19.6
26.5

27.2
20.1
2
71
60
13
(1.4)
(0.6)
58.6

30.1
18.2
2
67
55
13
(0.9)
(0.4)
23.4

30.0
20.0
2
77
55
24
(0.9)
(0.3)
22.2

30.0
20.6
1
77
55
23
(1.1)
(0.4)
22.1

30.0
21.0
1
77
55
23
(1.2)
(0.4)
26.3

12.7
13.3
5.5
40.7

15.1
15.7
7.0
44.8

15.2
15.9
6.1
52.8

17.7
18.5
7.1
62.2

20.8
21.6
8.3
73.3

12.8
4.0
9.0
3.7
3.0
3.6
3.6

10.8
3.6
6.8
13.7
1.5
9.9
4.7

10.7
3.1
6.6
3.9
3.0
1.9
4.0

9.2
2.6
5.3
10.7
9.6
6.8
4.7

7.8
2.2
4.1
13.9
12.5
8.3
5.5

Source: Company, HDFC sec Inst Research

Page | 12

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

RECOMMENDATION HISTORY
Sonata Software

Date
11-Feb-16
25-May-16
8-Jul-16
10-Aug-16
6-Oct-16
4-Nov-16

TP

220
200
180
160
140

CMP
155
149
173
153
157
163

Reco
BUY
BUY
BUY
BUY
BUY
BUY

Target
184
178
190
186
193
192

120

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

100

Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Page | 13

SONATA SOFTWARE: RESULTS REVIEW 2QFY17

Disclosure:
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this report.
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Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
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Institutional Equities
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Senapati Bapat Marg, Lower Parel,Mumbai - 400 013
Board : +91-22-6171-7330 www.hdfcsec.com
Page | 14