Sagility India Ltd. delivered robust Q4 FY26 results with revenue rising 25.8% YoY in constant currency, meeting market expectations. According to reports from NDTV Profit, the company's Ebit margin stood at 17.8% during the quarter. However, the adjusted profit after tax came in at ₹310 crore, up 28.0% YoY, which fell short of Motilal Oswal's estimate of ₹330 crore due to higher effective tax rates and margin pressures. The profit miss raises questions about margin sustainability despite strong revenue growth.
For the complete FY26 period, Sagility demonstrated strong momentum across key financial metrics. As reported by NDTV Profit, the company's revenue, Ebitda, and adjusted PAT grew 29.1%/35.4%/39.5% YoY in INR terms respectively. The stock has traded between ₹35.83 and ₹57.89 over the past year, currently near ₹44.19, reflecting a challenging year-to-date performance of -3.31%. This performance comes amid broader challenges in the IT services sector, where traditional revenue could face annual deflation of 2-3% over the next few years due to AI disruption and automation.
Management provided optimistic guidance for the upcoming fiscal year, projecting continued strong performance. According to NDTV Profit, the company expects low double-digit constant currency revenue growth in FY27, which represents a deceleration from the 20-25% growth in FY26. The company aims for Ebitda margins of 24-25% in FY27, though achieving this target will depend on capturing demand for value-added services like cloud migration, enterprise AI, and data engineering. This aligns with industry trends toward higher-value digital services, which require scale and specialized services.
Motilal Oswal has maintained its positive stance on Sagility following the quarterly results, valuing the stock at 20x FY28E EPS to arrive at a target price of ₹57. The firm reiterates its Buy rating on the stock, citing the company's growth drivers including new logo additions, cross-selling opportunities, and synergies from Broadpath acquisition. However, JPMorgan recently boosted its target to ₹63 from ₹60, while a consensus of 10-12 analysts maintains an average 12-month price target of ₹57-₹59.73. Despite the positive outlook, several factors warrant caution, including a final income tax assessment order for AY 2023-24 involving transfer pricing adjustments of ₹189.50 crore and a ₹100.00 crore demand.
