Sagility India’s stock has been making headlines after hitting a record high of ₹46.09 on December 20, 2024. This surge came after the global brokerage firm Jefferies initiated coverage with a ‘Buy’ rating and set a target price of ₹52. With a potential upside of 18.45% from its last close, is Sagility India a stock to buy or avoid? Let’s dive into the details.
Key Highlights
- Recent Performance: Sagility India’s stock price has soared by 63% in the past month and 13% in just the last five trading sessions.
- Brokerage Outlook: Jefferies projects a compound annual growth rate (CAGR) of 12% in revenue and 40% in profit for FY25-27, suggesting robust growth potential.
- Sector Focus: The company’s primary focus on the US healthcare market positions it strategically for consistent revenue growth.
Financial Performance
Profit and Loss Overview
| Year | Revenue (₹ Cr) | Net Profit (₹ Cr) | Profit Margin (%) |
|---|---|---|---|
| FY23 | 4,218 | 144 | 3.4 |
| FY24 | 4,754 | 228 | 4.8 |
- The company’s revenue and net profit have shown a steady increase.
- Profit margins remain modest but are improving.
Balance Sheet Snapshot
| Metric | Mar 2023 (₹ Cr) | Mar 2024 (₹ Cr) | Sep 2024 (₹ Cr) |
|---|---|---|---|
| Equity Capital | 1,919 | 4,285 | 4,679 |
| Reserves | 4,288 | 2,158 | 3,137 |
| Borrowings | 2,896 | 2,532 | 1,498 |
- The company has significantly reduced its borrowings, strengthening its financial stability.
- Equity capital has increased, likely due to the recent IPO.
Cash Flow Analysis
| Year | Operating (₹ Cr) | Investing (₹ Cr) | Financing (₹ Cr) |
|---|---|---|---|
| FY22 | -32 | -7,711 | 8,116 |
| FY23 | 857 | -101 | -545 |
| FY24 | 973 | -463 | -751 |
- Positive cash flow from operations indicates strong business fundamentals.
- Investing cash flow reflects capital expenditures, which may support future growth.
Key Ratios:
- ROCE: 5%
- Cash Conversion Cycle: Improved to 91 days from 366 days in 2022.
Valuation and Growth Potential
Price-to-Earnings (PE) Ratio
The company’s PE ratio aligns with its growth trajectory, driven by expectations of a 40% profit CAGR over the next two years.
Stock Performance vs. Nifty 50
| Metric | Sagility India | Nifty 50 |
|---|---|---|
| 5-Day Return | +13% | -3% |
| 1-Month Return | +63% | +2.4% |
| Since Listing (1M) | +57% | N/A |
Sagility India has outperformed the broader market, reflecting strong investor confidence.
Revenue Growth Comparison
| Metric | FY25-27 CAGR |
|---|---|
| Revenue Growth | 12% |
| Profit Growth | 40% |
Growth Prospects
Jefferies’ Analysis:
- Revenue Growth: Projected CAGR of 12% from FY25 to FY27.
- Profit Growth: Expected CAGR of 40%, indicating significant margin expansion.
- US Healthcare Focus: Sagility India is positioned to capitalize on the growing demand for healthcare solutions in the US market.
Operational Efficiency:
- Normalization of depreciation and amortization (D&A) expenses will enhance EPS.
- Debt reduction efforts are expected to improve the financial health of the company.
Key Strengths
- Market Focus: Strong positioning in the US healthcare sector.
- Growth Trajectory: Consistent revenue and profit growth projections.
- Debt Reduction: Significant decrease in borrowings, enhancing financial health.
Risks to Consider
- Sector Dependency: Heavy reliance on the US healthcare market may pose risks if sector conditions change.
- Valuation Risks: The stock’s sharp rally could lead to short-term corrections.
- Profit Margins: Modest margins may impact long-term profitability if growth slows.
Conclusion: Should You Buy Sagility India?
Sagility India’s impressive growth trajectory and strong market positioning make it an attractive investment. However, its reliance on the US healthcare sector and modest profit margins are factors to watch. With Jefferies setting a price target of ₹52, the stock offers potential upside for investors willing to take moderate risks. If you’re seeking growth stocks with exposure to the healthcare sector, Sagility India could be a good addition to your portfolio.
Disclaimer
The information provided here is for educational purposes only and should not be considered as financial advice. Please consult your financial advisor before making any investment decisions. FinGuys is not a SEBI-registered analyst and does not guarantee the accuracy of the data presented.