Multibagger Alert: Rs 183 to Rs 840, This midcap IT stock gave a return of 350% in five years. Do you own it?

An amount of Rs 1 lakh invested in Sonata Software in December 2016 would have become Rs 4.5 lakh in December 2021.

With strong fundamentals, the stock of multibagger Sonata software rallied from Rs 183 in December 2016 to Rs 840 today, surging 4.5x times in five years. An amount of Rs 1 lakh invested in December 2016 would have become Rs 4.5 lakh in November 2021.

In 2021 alone, the stock has doubled from Rs 390 in January to Rs 840 today, registering a return of 113% in 12 odd months. Rs 1 lakh invested in January 2021 would have become Rs 2.13 lakh today.

The company provides IT services to travel, retail, Agri & commodities as well as manufacturing and software vendors. Its niche service is platformation business, which ensures services built on Microsoft Dynamics 365, Microsoft Azure, AWS, cloud engineering, and managed services.

Competitive strengths

Expanding software portfolio: The core platforms are Rezopia, Brick and click, Halosys, Kartopia which provides digital solutions to various businesses. In March 2021, Sonata Software launched ‘CXe’, an AI-powered customer experience (CX) platform. It is a unique enhanced integrated CX management solution developed using the platformation approach.

Financials: Total revenue for the quarter ended September 30, 2021, stood at Rs 963 crore, as compared to Rs 803 crore in the same period last year, which is a YoY growth of 19%. EBITDA in Q2FY22 stood at Rs 123 crore, which is a YoY growth of 40%. EBITDA margin stood at 12.7% in Q2FY22 as compared to 11% in Q2FY21. Net Profit stood at Rs 91 crore for Q2 FY22, which is a YoY growth of 60%. PAT margin stood at 9.46% in Q2FY22 as compared to 7.5% in Q2FY21.

The company has posted exceptional revenue and profit growth in the last 3 to 4 quarters, the anticipation of strong growth in revenue, profit and improved margins has made the stock rally in 2021. It hit a 52-week high of Rs 1030 on October 21 after Q2 results are out.

Do you think Sonata Software can sustain the rally with their strong earnings growth in future?