Health-tech services provider Sagility India made its debut on the bourses in November, and its share price has not ceased to create a buzz ever since.
On Friday, the company’s shares were locked in a 5% upper circuit on BSE at Rs 52.84 per share.
The stock hit the upper band for the second consecutive session.
This has followed an over 48% gain in Sagility’s share price over the last one month, during which period the BSE Sensex dropped by over 2%.
Since its IPO in November, Sagility India is up by more than 80%.
Invezz finds out what’s driving the surge?
Sagility India IPO adds to its unique position in the BPM sector
Sagility India has succeeded in carving a niche for itself in the business process management (BPM) sector through consistent growth and higher margins.
Axis Capital initiated coverage on the stock on Friday, with a “Buy” rating and a target price of Rs 60, implying a 20% upside.
According to the brokerage, the company has seen a 12% compound annual growth rate (CAGR) in USD revenue from FY18 to FY24, driven by a robust offshore delivery model, with 94.4% of its workforce based offshore.
Its EBITDA margin of 24-25% outperforms industry standards, driven by cost efficiencies and strategic workforce distribution, the brokerage added.
Moreover, its experienced leadership team, established after the carve-out of HGS’s healthcare business, has maintained strong client relationships and operational excellence.
Axis said while high client concentration is a concern, Sagility has been diversifying its client base. It said,
We think the valuation is fair, given the superior operating profile of Sagility India, notwithstanding its single-vertical exposure and high client concentration risks (which may continue to be the case, as is seen with most single-vertical exposure firms in the IT/BPM space).
Domain expertise in US healthcare gives Sagility a competitive edge
JP Morgan and Jefferies had also initiated coverage on the stock last month, both recommending a “Buy” rating, with target prices of Rs 54, and Rs 52 respectively.
The stock has already breached Jefferies’ target price by Friday’s close.
Sagility is recognized for its deep domain expertise in the US healthcare sector, positioning it as a key player in this space, noted Jefferies, adding the company was well-positioned to gain market share.
JPMorgan highlighted that Sagility is poised to capitalize on long-term growth drivers, particularly the rising trend of outsourcing in the US healthcare sector.
As healthcare providers strive to cut costs and improve efficiency, Sagility’s solutions have become indispensable, solidifying its position as a trusted outsourcing partner, JP Morgan said, adding,
The company’s deep domain expertise and longstanding client relationships further strengthen its competitive edge, enabling it to tap into high-margin areas such as data mining and analytics.
Earnings growth forecast
JPMorgan’s report projects a robust 50% compound annual growth rate (CAGR) in earnings over FY24-27, reinforcing its positive outlook for the stock.
Jefferies, on the other hand, is expecting the company’s revenue and net profit to grow at a CAGR of 12% and 40% respectively over financial yars 2025-2027.
Axis Capital forecasts robust growth, projecting CAGRs of 11.9%, 31.6%, and 40% for USD revenue, EBIT, and PAT, respectively, over FY24-28, aided by steady margins, lower amortization, and reduced interest costs.
Sagility’s superior cash generation further positions it for strong shareholder returns, aligned with typical private equity funding structures, Axis said.
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