Long-term Investment Advice (A): Information Technology stock | 45-50% target | Indian stock investing recommendation on 16 May 2025

NOTE

Closing Price: ₹176 (as of May 15, 2025)
StopLoss*: Apply on the daily close. After the first target, reset the StopLoss to your buying price.
Duration^: Approximate holding period based on the active trading days (excluding market holidays). Actual holding may vary with the market conditions.
Upside Potential#: Based on median of the suggested buy range.

Saksoft Limited, headquartered in Chennai and established in 1999, is a global IT company providing digital transformation solutions across the U.S., Europe, Asia Pacific, and other regions. The company specializes in application modernization, cloud migration, mobility, and user experience enhancement. It also offers intelligent automation services, including RPA, data analytics, AI/ML, IoT, and automated testing. Saksoft delivers managed services covering infrastructure support, database and application operations, and endpoint management. In addition, it provides strategic consulting, technology training, and domain-specific IT solutions. Its key client sectors include logistics, fintech, healthcare, retail, telecom, and government.

Revenue Mix

Product-wise Break-up

100% of Saksoft’s revenue comes from Computer Programming, Consultancy, and Related Activities
This means Saksoft is entirely focused on IT services like software development, consulting, and digital transformation.

Location-wise Break-up

USA: 43% of total revenue – Saksoft’s largest market.
Asia Pacific: 34% – Strong presence in India and other APAC regions.
Europe: 23% – Significant, but smaller compared to USA and APAC.

This shows Saksoft has a globally diversified revenue base, with a major focus on the US.

Verticals (Industry Focus)

Telecom: 42% – Saksoft’s largest industry vertical.
Fintech: 31% – Second largest, showing strength in digital finance.
Transportation & Logistics: 16%
Retail & Healthcare: 11%

The company serves multiple industries but is heavily weighted towards Telecom and Fintech.

Onsite vs Offsite Delivery

Offsite (Remote/India-based): 55%
Onsite (Client location/abroad): 45%

This indicates a balanced delivery model, with a slight preference for remote/ offshore execution, which is typically more cost-effective.

Financial Performance Highlights

Q3 FY25 Results of Saksoft Ltd

Revenue grew 18% year-on-year (YoY), reaching INR 227 crores.
EBITDA stood at INR 38 crores, with strong margins of 16.78%.
Net profit surged 20% YoY to INR 27 crores, exceeding industry benchmarks.
Profit After Tax (PAT) margins remained robust at 11.91%.

9-Month FY25 Performance (Ending Dec 31, 2024)

Operating revenues reached INR 643 crores, reflecting 14% YoY growth.
EBITDA grew 6% YoY to INR 110 crores, with margins at 17.08%.

Client and Employee Metrics

Client Growth

Expanded high-value client base, with clients spending over USD 1 million increasing from 17 to 18.

Workforce Strength

Total employee count reached 2,513 at quarter-end.
Technical workforce stood at 2,275, reinforcing core capabilities.
Global technical hiring grew by 437 employees, supporting strong revenue visibility.

Operational Efficiency

Utilization rates improved by 1% for the 9-month period ending December 31, 2024, despite seasonal furlough impacts.

Acquisition Insights

Augmento Labs (June 2024) – Acquired for up to ₹100 crore to boost digital engineering services like AI-enabled analytics and cloud solutions.
CEPTES Software (Announced Sept 2024) – A ₹62 crore deal to strengthen Salesforce expertise across Sales Cloud, AI, and Data Cloud offerings.
ZeTechno (Completed Jan 2025) – Acquired for ₹2.59 crore to expand ServiceNow and IT service management capabilities.

Market Outlook

Management remains optimistic for Q4 FY25 and FY26.
Strong order book expected to drive growth in the coming year.
U.S. discretionary IT spending likely to rise, while European market expected to remain cautious.

Company Valuation

P/E Ratio

Currently at 22.5, slightly above its 1-year median of 19.4, but below the industry average of 32, indicating undervaluation.

Intrinsic Value

Trading at ₹173, which is about 1.1x its intrinsic value of ₹153, suggesting the stock is fairly valued.

PEG Ratio

At 1.05, implying the stock is undervalued relative to its growth potential.

Cash Flow Analysis

Operating Cash Flow rose sharply from ₹84 crore in FY23 to ₹124 crore, indicating strong financial health.
CFO/PAT ratio stands at 0.83, aligned with its five-year average, showing efficient profit-to-cash conversion.

Debt Analysis

Debt-to-equity ratio is just 0.09, suggesting the company is virtually debt-free

Shareholding Summary

Promoters hold 66.68%, slightly up from 66.64% in December 2024, reflecting strong promoter confidence.
Foreign Institutional Investors (FIIs) have reduced their stake to 2.79% as of March 2025, down from 4% in March 2023, which is a concern.
Domestic Institutional Investors (DIIs) hold a minimal stake of 0.05%.

Technical Analysis

Key Observations

After dropping about 60% from it's all-time high, the stock is showing signs of a turnaround by forming an Inverted Head & Shoulders pattern.
A recent breakout suggests it’s ready to move higher and begin a new upward trend.

Technical Image

Conclusion

Saksoft stands out as a smart investment bet, fueled by robust financial growth, a healthy cash flow, and a virtually debt-free structure. With a rapidly expanding global footprint, a growing roster of high-value clients, and strategic acquisitions in AI and cloud services, it’s perfectly poised to ride the wave of the digital and AI revolution. Trading at an attractive valuation, Saksoft offers investors a unique blend of stability and innovation—making it a compelling choice for those looking to capitalize on tomorrow’s technology today.

MONEY MANAGEMENT AND TRADING RULES

Buy within the recommended price range. You may allow up to 1% flexibility beyond the range if needed.
No need to rush. The recommendation remains valid for up to 7 days, not just at market open.
Use a trailing stop-loss to protect and lock in profits.
Diversify your trading capital across our other recommended stocks to reduce risk.
Invest responsibly. Trade only with funds you can afford to lose and hedge positions where appropriate.

Analyst Summary

The research analysis is prepared by Arijit Banerjee, CMT, CFTe. He is a veteran trader and an active investor having in-depth knowledge in financial market research, advanced technical analysis, market cycle, algorithmic trading and portfolio management. Arijit is a Chartered Market Technician (CMT) accredited by CMT Association USA, the leading global authority of Technical Analysis and has been honoured by Certified Financial Technician (CFTe) from the International Federation of Technical Analysts, USA. SEBI, the regulatory body of Indian financial market also recognizes him as a Research Analyst (INH300006582)

The views expressed herein are based solely on information available publicly/internal data/other sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to accuracy. The recommendations provided herein is solely for informational purposes and are not intended to be and must not be taken alone as the basis for an investment/trading decision. Trading and investing are subject to market risk and the securities discussed and opinions expressed herein may not be suitable for all investors. To read the full disclosure, please click here.

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