Jefferies Initiates ‘Buy’ on Sagility India, Predicts 18% Upside; Shares Jump 5%

Global brokerage Jefferies has initiated coverage on Sagility India, a business process management (BPM) company, with a “Buy” recommendation and a target price of Rs 52 per share.

This implies a potential upside of approximately 18% from the previous session’s closing price of Rs 43.9. Following this announcement, Sagility’s shares surged by 5%, reaching Rs 46.09 at 9:15 AM.

Jefferies highlighted Sagility’s expertise in the US healthcare sector, noting its robust growth potential.

The brokerage forecasts a compound annual growth rate (CAGR) of 12% in revenue and 40% in profit after tax (PAT) for the period FY25 to FY27.

According to Jefferies, “The firm’s superior earnings growth outlook is anticipated to sustain its current PE multiples, highlighting the company’s strong growth potential.”

Strong Growth Driven by Key Factors

Jefferies attributes Sagility’s projected growth to several factors, including its ability to sustain double-digit revenue growth and normalize depreciation and amortization (D&A) costs.

Additionally, efforts to reduce debt are expected to enhance earnings per share (EPS).

Sagility’s strategic focus on the US healthcare BPM market positions it as an attractive investment.

Jefferies believes the company’s financial improvements and strong performance will help maintain its valuation, making it appealing to investors in the coming years.

Stock Performance and Market Trends

Sagility’s shares have risen approximately 50% over the past year, outperforming the Nifty 50, which gained 13% during the same period.

On December 24, Sagility’s share price hit the upper circuit limit of Rs 48.91 on the Bombay Stock Exchange (BSE), marking a 5% increase and an all-time high since its listing on November 12.

This rally was fueled by bullish notes from global brokerages like Jefferies and JP Morgan.

JP Morgan initiated coverage on Sagility India with an “Overweight” rating and a target price of Rs 54, reflecting a potential upside of 16% from its previous close.

JP Morgan highlighted Sagility’s deep domain expertise and strong client relationships as key drivers of its growth. The brokerage also emphasized the company’s robust EBIT margins, supported by a higher offshore mix.

Financial Projections and Market Position

Jefferies projects that Sagility’s EBIT margins will nearly double to 16.5% by FY27, driven by normalized D&A costs. This is expected to result in a 31% CAGR in EBIT over FY25-27.

Additionally, deleveraging the balance sheet will lower interest costs, further boosting earnings growth to a remarkable 40% CAGR over the same period.

Sagility’s structural tailwinds stem from increasing outsourcing in the US healthcare industry, which is under-penetrated at just 22%.

JP Morgan estimates that Sagility can grow its market share by 15%, outperforming the broader market’s growth rate of 9%. The brokerage noted that Sagility’s focus on non-discretionary spending ensures a stable revenue profile.

IPO Performance and Investor Interest

Sagility debuted on the stock market with an issue price of Rs 30 per share. Since its listing, the stock has surged over 63%, reflecting strong investor demand.

The IPO, which was subscribed 3.2 times, saw significant participation from retail investors. On its debut, the stock opened at Rs 31.06, a 3.53% premium over its IPO price.

Since listing, Sagility’s shares have risen by 59%, underscoring optimism about its growth prospects. Bloomberg data indicates that analysts tracking the stock have a “Buy” rating, with an average 12-month price target suggesting a further upside of 13.7%.

Risks and Challenges

Despite its strong performance, Sagility faces certain risks. High client concentration and potential regulatory changes in the US healthcare sector could impact its growth.

Additionally, aggressive adoption of generative AI and in-sourcing by top clients pose challenges.

A Promising Investment Opportunity

Sagility India’s strong positioning in the US healthcare BPM market, combined with its financial improvements and strategic focus, makes it a compelling investment choice.

With double-digit revenue growth, robust EBIT margins, and a focus on operational efficiency, Sagility is well-poised for sustained growth in the years ahead.