Saksoft Ltd: Temporary headwinds, normalization in sight - Company Update

We maintain our "BUY" rating with a revised target price of Rs 285 (vs 325). Saksoft delivered weak results – 
a) topline growth saw a de-growth of 3% despite the favourable currency mix, 
b) Top 2 clients have cut spends in Q3, the pain could be seen in Q4 as well, and 
c) EBITDA margins declined QoQ on higher employee costs.
Emerging vertical (Hi-tech) and retail saw de-growth in Q3, while BFS was stable. We have cut our estimates over FY27E–FY28E and now expect the company to grow in mid-teens over vs its decadal average of 20%+.

Revenue declines QoQ despite currency tailwinds:

The company posted a 3% QoQ de-growth, 10.6% YoY growth led slowdown in spending by top 2 clients. Slower spends along with lack of new deal wins (1 mn$+) has led to sluggish growth in Q3.  The company has won couple of new deals, but deal size is lower at <0.5 mn$. Revenue from top 5 clients increased to 42% in 9MFY26 vs. 40% in FY25, contribution from top 10 clients increased to 58% vs. 55% in FY25 and contribution from top 20 clients increased to 70% vs. 69% in FY25.  

EBITDA margins to remain at the lower end of 18-19%

Margins declined by 140 bps QoQ on the back of higher employee expenses.  Lower other expenses aided margins in Q3. We expect margins to normalize in the lower end 18-19% over the next few quarters. Utilization came in at 83% due to loss of revenue, we expect it return to 85% levels over the next few quarters.

Outlook

Saksoft’s lower dependence on discretionary spends has enabled them to sustain double-digit growth despite a sluggish global demand environment. Since Saksoft’s dependence on top 20 clients is close to 70%, any decline in spends will have larger impact on its growth trajectory going forward. We expect things to normalize by Q1FY27, but it might take longer to return to 20%+ growth trajectory.

Valuation

We expect 11.9%/15.3%/16.2%Revenue/EBITDA/PAT CAGR between FY25-28E. We have retained our target multiple of 20x and expect the company to return to normal growth trajectory from Q1FY27. We have cut our earnings by 13.3% CAGR FY26-28e. We value the company at 20x Dec28 PE, resulting in a TP of Rs 285. We do not factor in any acquisitions in our base case.

Key risks:

1. Slowdown in any of the 4 key segments for the company
2. Lower spends by SMBs in US & Europe.
3. Continued spending decline across top clients and inability to win new deals.

Company website: https://www.saksoft.com/

*CMP is as per report published date

Click to download the full Saksoft Ltd Q3FY26 Company Update

Analyst:

• Vinay Menon - Senior Research Analyst, Institutional Equities (NISM-201600112117)
• Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)

Open your MNCL Demat Account

FAQs on Saksoft Ltd Q3FY26 Company Update

Here are key investor questions addressing near-term challenges, growth outlook and valuation based on our institutional equity research perspective.

1. What is the current investment view on Saksoft?

The stock is rated BUY with a target price of ₹285, implying ~66% upside from current levels.

2. Why did the company report weak recent performance?

Growth was impacted by reduced spending from the top two clients, slower deal wins and higher employee costs, which also affected margins.

3. When is performance expected to improve?

Spending is expected to stabilize and growth normalize by Q1FY27, supported by utilization recovery and steady demand in core verticals like BFSI.

4. What is the medium-term growth outlook?

The company is expected to deliver mid-teen revenue growth over FY25–28E with EBITDA margins stabilizing in the 18–19% range.

5. What are the key risks to the investment case?

Risks include further spending cuts by large clients, slowdown in key verticals, weaker SMB technology budgets in the US/Europe and delays in large deal wins.

Before You Trade, Strengthen Your Foundations with These Guides

• For a stronger understanding of indicators such as RSI, VWAP, and trendlines, check our 👉 Technical Analysis Fundamentals section.
• Want to refine your risk-reward planning? Explore our insights on 👉 Position Sizing & Risk Management Strategies.