Broker’s call: Saksoft (India) (Buy)

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Target: ₹435

CMP: ₹236.40

We initiate coverage on Saksoft with a “Buy” rating and a TP of ₹435. With a robust history spanning over two decades in IT solutions, Saksoft has distinguished itself as a top player in digital engineering, with its deep expertise in product engineering, testing, digital commerce, cloud services, and DevOps.

The company caters to marquee names in the niche sectors of Fintech, Hi-tech, transport & logistics, and retail. We regard Saksoft as a compelling investment opportunity, benefitting from sustained IT expenditure in the niche sectors its services and improving discretionary spends driven by interest rate cuts.

This thinly owned, grossly under-researched (no institutional coverage) and under-valued business, we believe can trade at higher valuations given the sustained IT spending in digital engineering, cloud, data and digital commerce – the key segments of business for Saksoft.

We are factoring in 21/22.3/24.4 per cent CAGR in revenue/EBITDA/PAT over FY25-FY27E. We value the business at 25x FY27E EPS (in-line with micro/small cap IT cos and a discount to mid-cap IT cos), to arrive at a TP of ₹435. Our bull case TP is ₹475/bear case TP is ₹290.

Key risks: Delayed interest rate cuts, lower IT spends, reduced wallet share from top 20 clients.