Sagility EBITDA beat lifts margin guidance as AI and Chirok expand growth visibility

Investment View and Valuation

Motilal Oswal Financial Services reiterated its Buy rating on Sagility in its October 22, 2026 2QFY27 result update. The broker remains positive on the company’s growth visibility, supported by increased work volumes from leading clients, new client additions, cross-selling, acquisition synergies and a broader end-to-end payer and provider revenue-cycle-management offering.

Motilal Oswal expects Sagility to deliver low- to mid-teens growth in FY27 and forecasts revenue, EBITDA and PAT CAGR of 17 per cent, 19 per cent and 23 per cent, respectively, over FY26 to FY28.

2QFY27 Financial Performance

Sagility reported 2QFY27 revenue of Rs 20,321 million, up 22.5 per cent YoY and broadly in line with Motilal Oswal’s estimate of Rs 20,322 million. Organic revenue grew 22.2 per cent YoY, or 11.9 per cent in constant currency terms.

EBITDA increased 23.4 per cent YoY to Rs 5,123 million, ahead of the broker’s Rs 4,735 million estimate. The reported EBITDA margin was 25.2 per cent, compared with the estimated 23.3 per cent. Reported PAT of Rs 2,842 million was below the broker’s Rs 3,032 million estimate, although PAT excluding other income exceeded expectations.

Management reported adjusted EBITDA of Rs 5,353 million, up 23 per cent YoY, with an adjusted EBITDA margin of 26.3 per cent, its highest level in six quarters.

FY27 Guidance and Margin Outlook

Management retained FY27 guidance for low double-digit organic constant-currency revenue growth, despite expecting annual-enrolment-period and open-enrolment revenue to be slightly lower YoY. It cited healthy underlying business momentum and a robust pipeline.

Following operating efficiencies, favourable foreign exchange, geographical mix and cost discipline, management raised FY27 adjusted EBITDA margin guidance to 25-26 per cent from 24-25 per cent. The approximately Rs 148 million quarterly effect of statutory wage revisions in 2QFY27 has already been included in this guidance.

Management expects medium-term margins to remain broadly within the 24-26 per cent range, with possible marginal benefit from retained AI efficiencies.

Client Wins, Contract Value and Operating Metrics

Sagility’s 2Q deal annual contract value rose 18.2 per cent YoY to USD 40.2 million, covering wins from 31 existing clients and one new client. The company won a payment-integrity engagement with a Big Ten health plan covering more than 10 million members, with minimum potential annual contract value above USD 10 million. Revenue from this contingency-based engagement is expected to build gradually.

Sagility served 105 active client groups, while all top 10 client groups generated more than USD 20 million of trailing-12-month revenue for the first time. Employee strength was 51,486 and voluntary attrition improved to 25.7 per cent from 28.6 per cent in Q1FY27.

AI-Led Transformation and Business Expansion

Motilal Oswal highlights AI-led transformation and the expansion of end-to-end payer and provider capabilities as important growth drivers. Sagility is progressing from individual AI use cases to end-to-end agentic AI workflows, including Smart Tech Appeals Assist, Nurse Assist and Claims Assist.

Productivity gains are expected to be partly shared with clients, while some gains will be retained to fund technology investment and offset operating costs.

Chirok Acquisition and Provider Opportunity

The Chirok acquisition adds clinical documentation improvement, medical coding, risk adjustment and HEDIS capabilities to Sagility’s patient-access, denials and accounts-receivable offerings. Chirok generated trailing-12-month revenue of USD 13 million through September 2026, an adjusted EBITDA margin of 35.8 per cent and net revenue retention of 115 per cent.

The acquisition is intended primarily to create revenue synergies through cross-selling and larger end-to-end provider contracts rather than immediate margin expansion. Providers accounted for 10.1 per cent of 2Q revenue, although management has not set a specific target for this mix.

Estimate Revisions and Target Price

Motilal Oswal increased its FY27E and FY28E estimates as follows:

The broker values Sagility at 19 times FY28E EPS to derive a Rs 57 target price.