Stock To Buy: Small Cap IT Stock Showing 25% Return Potential, Target Price Rs 150

Brokerage firm Bonanza has assigned buy call to leading IT stock, Saksoft Ltd with a target price of Rs 150 apiece. The current market price of the stock is Rs 120 apiece. If you buy the stock now, it can give a potential return of 25%. The company has a market capitalisation of Rs 1207 crore.

Recently, the stock price of Saksoft Ltd. (Saksoft) corrected by ~10% from 52-week high of Rs.137.45 despite reporting good set of numbers by Saksoft in the recent quarters. Check key details below:

1. Saksoft Ltd Stock Performance & Return

The last trading price of the stock is Rs 120 apiece with 52-week high at Rs 137 and 52-week low at Rs 68 apiece, respectively. The stock has given multibagger returns. In last 4-years, the stock has jumped 407%, and 492% in last 3-years. The shares have rallied 33% in last 1-year. The stock has witnessed a surge of 10% in last 1-month.

2. Financials

During the past 5 years, revenue of Saksoft grew at a CAGR of 13.1% while PAT grew at a CAGR of 29.9% in the same period. Saksoft has reported 10.7% QoQ and 42.8% YoY growth in revenue in Q2FY23 to Rs.1,638mn led by its continuous focus on digital service offerings across selected industry verticals.

Saksoft's EBITDA improved by 12.5% QoQ and 49.2% YoY to Rs.289mn in Q2FY23. Despite the challenging environment, Saksoft's EBITDA margin improved by 52bps QoQ to 15.7% in Q2FY23 mainly due to 78bps QoQ decline in employee cost to sales. Saksoft has added two new customers in $0.5Mn and one customer in $1Mn revenue segment in Q2FY23.

3. Key Business Highlights

Saksoft is engaged in providing business intelligence and information management solutions predominantly to mid-tier companies across various countries. Saksoft is a leading digital transformation partner for clients, providing services like application development, testing & quality control and solutions based on cloud, mobility and Internet of Things (IoT) and Business Intelligence (BI) solutions.

4. Valuation

According to Bonanza, "With a leading digital transformation partner, recent acquisition of Terafast Networks, capability to aid growth under its ‘inch wide mile deep' strategy, helping fintechs to achieve desired outcomes, 6 acquisitions to add capabilities and newer service verticals and forayed into delivering healthcare solutions, we value Saksoft at 17.0x FY24E EPS of Rs.8.80 to arrive at target price of Rs.150.00, an upside of 25%"

5. About Saksoft

Saksoft is a leading digital transformation partner that assists customers to automate, modernize and manage IT systems through a combination of domain specific technology and solution accelerators from consulting to support.

Saksoft offers a gamut of services including strategic consulting, information management, application development, digital testing, robotic process automation (RPA), cloud, mobility and internet of things (IoT). Saksoft has recently acquired Terafast Networks, a Chennai-based IT consulting service provider.

Disclaimer

The stock has been picked from the brokerage report of Bonanza. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.