BroadPath Acquisition Boosts Sagility's Growth Outlook, Jefferies Says; Keeps Buy
Jefferies sees limited integration risks as both companies specialize in US healthcare and have complementary services
(The Corner Office Journal) -- Brokerage Jefferies said the acquisition of US-based BroadPath Healthcare Solutions will boost Sagility India Ltd.’s growth outlook and reiterated its Buy rating on the stock with a target price of 64 rupees.
The target price implies a return of nearly 48% from Sagility’s closing price of 43.30 rupees on the National Stock Exchange yesterday.
Sagility yesterday announced the acquisition of US healthcare focused services company BroadPath for 502 crore rupees ($58 million) in cash to strengthen its position in both the large and mid-sized US healthcare payer segments.
“Acquisition boosts Sagility's growth outlook,” Jefferies said in an investor note.
BroadPath’s strength in member acquisition and enrollment services in medicare and medicaid complements Sagility's strength in claims management and payment integrity, implying greater cross-sell potential, it added.
The brokerage said given Sagility's success in mining accounts in the past, this transaction will boost its longer-term growth potential as it will be able to mine over 70 clients instead of 42 as of June 2024.
The deal will also reduce client concentration and improve its onshore presence, it noted.
“We see limited integration risks as (1) both companies operate in the same geography and vertical with complementary nature of services and (2) it is unlikely that Sagility will materially change BroadPath’s delivery mix as member-acquisition and enrollment services usually require higher onshore mix,” Jefferies said.
The brokerage said the deal will also likely be EPS/ROCE accretive without assuming any merger synergies.
Jefferies said it views Sagility's acquisition of BroadPath positively as (1) it boosts Sagility's longer-term growth potential given it has more accounts to mine, (2) the deal will likely be EPS/ROCE accretive and (3) it sees limited integration risks.
The brokerage also said post the recent correction, Sagility trades at 32x FY26 PE, which is attractive for its 42% EPS CAGR over FY25-FY27.
Note: $1 = 86.5951 Indian rupees
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