SONATA SOFTWARE
Sonata software- (CMP: 45.05) As per the industry rankings released by NASSCOM for FY08-09, Sonata was ranked among the Top 20 IT Software and Service Exporters in India for the second consecutive year. In a comprehensive industry study conducted by Zinnov Management Consulting Pvt. Ltd across service providers from China, India and Eastern Europe, Sonata has been ranked among Top 10 R&D Services players globally. Sonata has also been ranked 6th in the Software Products segment by Zinnov. Zinnov is a leading management consulting company providing services in the area of Offshore Advisory, Market Expansion and Human Capital Optimization to Fortune 1000 companies. The company was also recognized as Microsoft Gold Certified Partner for Business Intelligence. Sonata was a winner in the Deloitte Technology Fast 500 Asia Pacific 2009 program. The program recognizes the fastest growing and most dynamic technology companies in Asia Pacific region.
This is an example of a very good company, but unable to accelerate growth, probably because of lack of conviction in new areas by the Management. The PE of this company is around 9 against an industry PE of 22.
The company does have clients in UK and the recession may be an issue. Dividend yield is around 4%, which is as good as savings bank. The company is returning Rs 5 (EPS) which translates into 10% ROI. In addition the company has excellent ROIC (enviable) and excellent management (Zero debt, no equity dilution). A good pick at every fall. I believe will be a steady compounding stock. If we assume a growth in EPS of 10%, the forward EPS for the year will be around 6.25 and at a PE of 10, the stock could easily achieve the target price of 63. With a regular dividend yield of 4%, it is a must for a conservative portfolio.
This is an example of a very good company, but unable to accelerate growth, probably because of lack of conviction in new areas by the Management. The PE of this company is around 9 against an industry PE of 22.
The company does have clients in UK and the recession may be an issue. Dividend yield is around 4%, which is as good as savings bank. The company is returning Rs 5 (EPS) which translates into 10% ROI. In addition the company has excellent ROIC (enviable) and excellent management (Zero debt, no equity dilution). A good pick at every fall. I believe will be a steady compounding stock. If we assume a growth in EPS of 10%, the forward EPS for the year will be around 6.25 and at a PE of 10, the stock could easily achieve the target price of 63. With a regular dividend yield of 4%, it is a must for a conservative portfolio.
Wild shot- The Company could be a takeover candidate in the industry where M&A is regular. Also could be a prime bonus candidate
Disclosure: One fourth of my portfolio consists of sonata software.
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