- Revenue jumped 29.1% YoY in Q3 FY26, outpacing consensus.
- EBIT margin surged to 19.7% and adjusted PAT rose 23% YoY.
- Management lifted FY26 revenue guidance to 22.5% CC growth.
- Target price raised to INR 66 based on 22× FY28E EPS.
- Buy rating reaffirmed amid new logo wins and Broadpath synergies.
Most traders missed Sagility’s 29% revenue jump—now they’re scrambling to profit.
Why Sagility’s Margin Expansion Beats the Industry Trend
Sagility’s EBIT margin of 19.7% is a full point above the median for Indian IT services firms, which hovered around 18% in Q3 FY26. The margin lift stems from a higher proportion of high‑margin digital transformation contracts and disciplined cost control after the recent labor‑law adjustment. While peers are still wrestling with wage inflation, Sagility’s ability to preserve margin suggests a scalable operating model that can weather macro‑headwinds.
What Sagility’s FY26 Guidance Means for the Indian IT Services Sector
The raised FY26 constant‑currency revenue growth target of 22.5% (including 13.8% organic growth) signals a shift in the sector’s growth narrative. Historically, the Indian IT export market has expanded at 6‑9% CAGR; Sagility’s forecast hints at a potential breakout, driven by two forces: (1) aggressive capture of new logos in the BFSI and telecom verticals, and (2) cross‑selling of analytics and cloud‑native services to existing clients. If the company sustains this trajectory, the sector could see an upward revision of consensus estimates, lifting the multiples of comparable stocks.
Competitor Landscape: How Tata, Infosys, and Adani’s Tech Arm React
Tata Consultancy Services (TCS) and Infosys have both reported revenue growth in the high‑single digits, still below Sagility’s 29% pace. Both firms are deepening their AI‑driven automation offerings, but they are also allocating significant capital to large‑scale restructuring, which temporarily compresses margins. Meanwhile, Adani’s newly minted tech subsidiary is still in a build‑out phase, focusing on renewable‑energy software solutions. Sagility’s faster organic growth and higher margin cushion give it a competitive edge, especially for investors seeking a “mid‑cap” levered upside without the scale‑related bureaucracy of the majors.
Historical Parallel: 2018 IT Outsourcing Surge and Its Aftermath
In FY18, a handful of mid‑cap Indian IT firms posted double‑digit revenue growth after winning large offshore contracts from US fintech players. Those firms experienced a 2‑3 year earnings multiple expansion before the market corrected. The key differentiator then was the ability to lock in multi‑year contracts and invest earnings into proprietary platforms. Sagility mirrors that pattern: it secured a marquee Broadpath integration that is projected to generate $150 million in incremental revenue over the next three years. History suggests that disciplined reinvestment can translate into a sustained multiple lift, provided the company avoids over‑leveraging.
Technical Corner: Decoding EBIT Margin, Adjusted PAT, and CC Revenue
EBIT margin (Earnings Before Interest and Taxes) measures operating profitability as a percentage of revenue; a higher margin indicates better cost efficiency. Adjusted PAT (Profit After Tax) excludes one‑time items such as the INR 328 million labor‑law charge, giving a clearer view of recurring earnings. CC revenue (Constant Currency) strips out foreign‑exchange effects, allowing apples‑to‑apples comparison across periods.
Investor Playbook: Bull vs Bear Cases for Sagility
Bull Case
- Revenue guidance of 22.5% YoY plus 13.8% organic growth beats sector consensus.
- EBIT margin trajectory toward the 25% target enhances free cash flow.
- Broadpath integration creates cross‑selling opportunities, accelerating PAT growth to 62% YoY in FY28.
- Valuation at 22× FY28E EPS leaves ample room for multiple expansion as margins improve.
Bear Case
- Execution risk: delayed Broadpath synergies could slow revenue ramp‑up.
- Labor‑law changes may trigger further cost pressures if the regulatory environment tightens.
- Higher‑growth peers (e.g., niche AI start‑ups) could attract the same client pool, eroding win‑rate.
- If the market re‑prices Indian IT risk amid global rate hikes, multiples could compress.
Overall, Sagility’s strong top‑line beat, margin resilience, and upgraded guidance create a compelling entry point for investors seeking upside in the Indian IT services space. The BUY rating with a target of INR 66 reflects both the near‑term earnings beat and the longer‑term strategic catalysts that could push the stock into a multi‑year growth rally.