Shares of Sagility India Ltd surged by 8.26 percent on Monday, reaching a high of Rs 43.80. This rise comes as several domestic brokerages reaffirmed their 'Buy' ratings for the healthcare-focused Business Process Management (BPM) firm, even though it reported a sequential decline in its June quarter revenue.
Q1 Revenue Performance and Seasonal Adjustments
Sagility's reported revenue for Q1 saw a 6.4 percent quarter-on-quarter (QoQ) decrease, though it was up 15 percent year-on-year (YoY). However, analysts highlighted that this QoQ dip was largely due to seasonal factors. Elara Capital noted that when adjusted for the typical revenue bump-up in Q4 FY26, Q1 revenue actually increased by 5 percent QoQ. The company anticipates a similar seasonality this year, expecting higher revenues in the second half (H2) compared to the first half (H1).
Mirae Asset Sharekhan attributed the sequential revenue decline to the absence of the open enrollment (OE) period, which typically boosts Q4 numbers. Removing the sequential impact of the OE period, revenue growth stood at 5.1 percent QoQ.
Brokerage Confidence and Strategic Growth
Brokerages remain optimistic about Sagility's medium-term prospects. They point to the ongoing cost pressures faced by the top-10 health insurers in the US, which are increasingly seeking outsourcing opportunities. Sagility currently partners with seven of these major insurers and is actively pursuing business with the remaining three.
Client diversification is another key factor underpinning confidence. The contribution of the top three, top five, and top 10 clients to Q1 FY27 revenue improved, falling to 60 percent, 70 percent, and 84 percent respectively, from 72 percent, 81 percent, and 91 percent in FY23.
Furthermore, Sagility's recent acquisition of CareSeed, a tuck-in acquisition generating approximately $5 million in annual revenue, is expected to enhance its capabilities in Healthcare Effectiveness Data and Information Set (HEDIS) reporting. The company also maintained its adjusted EBITDA margin guidance of 24-25 percent for FY27.
Target Price Revisions
- Elara Capital: Retained its 'Buy' rating and raised its target price for Sagility shares to Rs 58.
- Mirae Asset Sharekhan: Maintained its 'Buy' rating despite a modest reduction in FY28 earnings per share (EPS) estimates, factoring in a 120 basis points margin impact from recent minimum wage hikes. They revised their target price to Rs 52, citing management's reiterated FY27 growth and margin guidance, strong deal momentum, and exposure to the largely non-discretionary healthcare operations market.