Sagility India, a provider of health-tech services, made its debut in the stock exchanges in November. Since then, its share price has been generating a lot of buzz.
On Friday, the shares of the company were locked at Rs 52.84 each on BSE in a 5% higher circuit.
The stock reached the upper band of the range for the second session in a row.
Sagility’s shares have risen by more than 48% in the last month, while the BSE Sensex has fallen by over 2%.
Sagility India has grown by more than 80% since its IPO last November.
ICD identifies the driving force behind the surge in ?
Sagility India IPO strengthens its position as a leader in BPM
Sagility India has been able to carve a niche in the Business Process Management (BPM) industry through its consistent growth and higher profit margins.
Axis Capital began coverage of the stock on Friday with a “Buy’ rating and a price target of Rs 60. This implies a 20% increase.
According to the brokerage company, the company has experienced a 12% CAGR in USD revenue between FY18 and FY24. This was driven by an offshore delivery model with 94.4% its workforce located offshore.
The brokerage said that its EBITDA margin is 24-25%, which is higher than the industry standard, due to cost efficiencies and a strategic workforce distribution.
The experienced leadership team that was formed after the separation of HGS’s healthcare business has maintained strong client relations and operational excellence.
Axis stated that while a high concentration of clients is a concern for Sagility, the company has been diversifying their client base. It said:
We believe the valuation is fair given the superior operating profiles of Sagility India. This is despite its single-vertical risk and high client concentration (which may continue to exist, as seen with most single vertical exposure firms in the IT/BPM sector).
Sagility’s domain expertise in US healthcare gives it a competitive advantage
JP Morgan and Jefferies also began coverage of the stock in November, recommending “Buy” ratings with respective target prices of Rs 54 and Rs 52.
By Friday’s close, the stock had already surpassed Jefferies’ price target.
Jefferies noted that Sagility was recognized for its deep domain knowledge in the US healthcare industry, positioning it as a major player in this sector. The company is well positioned to gain market shares, added Jefferies.
JPMorgan highlighted Sagility’s ability to capitalize on long-term drivers of growth, including the rising trend of outsourcing healthcare in the US.
JP Morgan stated that Sagility’s solutions are essential for healthcare providers to reduce costs and improve efficiency. This has solidified its position as a reliable outsourcing partner.
The company’s deep expertise in the domain and its long-standing client relationships strengthen its competitive advantage, allowing it to tap into high margin areas such as data mining.
Earnings Growth Forecast
JPMorgan’s latest report projects a 50% CAGR in earnings for FY24-27. This reinforces its positive outlook on the stock.
Jefferies, meanwhile, expects the company’s revenue to grow at a CAGR between 12% and 40% over the financial years 2025-2027.
Axis Capital expects robust growth. It projects CAGRs of 11.9% for USD revenue, 31.6% for EBIT and 40% PAT over FY24-28. This is aided by stable margins, lower interest costs, and lower amortization.
Axis stated that Sagility’s superior ability to generate cash is a further advantage for shareholders, as it aligns with typical private equity financing structures.
This post Sagility India stocks soars: What’s driving the rally. This post may be updated as new information unfolds
This site is for entertainment only. Click here to read more
