Prabhudas Liladhar initiate coverage on Fractal Analytics, pegs target at INR 1,260; models faster profit growth and margin lift through FY28
Prabhudas Lilladher (PL) has initiated coverage on Fractal Analytics with a Buy rating and a target price of INR 1,260, implying roughly 41% upside from current market price of INR 890. “We initiate coverage on Fractal with ‘BUY’ rating and TP of INR 1,260, valuing at 22x EV/EBITDA FY28E,” analysts Pritesh Thakkar and Sujay Chavan wrote in a research report. The brokerage argues Fractal’s AI-led analytics franchise, strong client retention and improving unit economics can drive a multi-year earnings and margin expansion, while product revenue under “Fractal Alpha” reduces cyclicality over time.
Fractal Analytics Initiation Highlights and Valuation
Fractal operates in data, analytics and AI (DAAI), powering decision-making for large enterprises using AI tools and services, the brokerage said. PL values the stock at 22x FY28E EV/EBITDA, arriving at a INR 1,260 target; by its estimates, Fractal currently trades near 15.4x FY28E EV/EBITDA, leaving room for re-rating as profitability scales, the report added. The firm cites decade-long execution—about 27% USD revenue CAGR, ~98% client retention, net revenue retention above 120%—and a deep sales engine as underpinnings for growth.
Operating Momentum and Margin Trajectory
PL expects consolidated USD revenue, INR EBITDA and INR PAT CAGRs of 19.3%, 30.9% and 44.5%, respectively, over FY26E–FY28E, aided by operating leverage, narrowing ESOP costs and a richer mix from higher-margin SaaS businesses under Fractal Alpha. EBITDA margin, which improved to 12.7% in FY25 from 3.3% in FY24, is projected to rise to 17.0% by FY28E; management focus is on lifting EBITDA margin beyond 20% over time.
On a reported basis, FY25 revenue rose 25.9% year-on-year to INR 2,765 crore (INR 2,196 crore in FY24), while EBITDA climbed to INR 350 crore (up INR 276 crore YoY) as margins normalised. Adjusted PAT swung to a profit of INR 196 crore in FY25 from a loss of INR 47.5 crore in FY24, the brokerage indicated.
Fractal Analytics Growth Drivers
- Account Mining and Cross-Sell: Roughly 80% of revenue is annuity-led from existing accounts; PL highlights a strong NPS of ~77 and steady graduation of clients into higher revenue buckets, underpinning 120%+ NRR, the report said.
- Vertical Mix: Over 50% of revenue stems from healthcare & life sciences (HLS) and consumer packaged goods (CPG), with ~40% tied to revenue growth management (RGM) and optimisation, aligning with the fastest-growing functional pools in DAAI.
- Productisation Edge: The analysts expect Fractal Alpha (including platforms such as Asper.ai and the agentic-AI fabric Cogentiq) to break even by FY27E and scale to ~25% segmental margins by FY28E, supporting consolidated margin lift.
Market Reaction
Shares of Fractal were trading at INR 889 on the NSE at 12:02 PM on Tuesday, 17 February 2026, up 4.9% intraday; the stock touched a day’s high of INR 898.30 and a low of INR 830.00, with about 24.35 lakh shares changing hands, according to exchange data. PL’s report used a coverage price (CMP) of INR 900 as of 16 February 2026, and estimated Fractal Analytics target price of INR 1,260 target (upside potential of about 40%), the note said.
Peer Context and Balance Sheet Signals
PL’s peer screen shows Fractal’s FY28E EV/EBITDA at ~15.4x versus an average of ~14.8x for select Indian IT/analytics comparables, reflecting the street’s expectation of faster earnings compounding as AI adoption scales, the report indicated. The brokerage also notes that part of the proposed IPO proceeds may be used to repay about INR 264.9 crore of borrowings at a subsidiary, and to fund R&D and go-to-market for Fractal Alpha, which could improve net other income and strengthen the growth runway, the note added.
Risks Flagged in PL Capital Report on Fractal Analytics
While structurally positive on AI spend, PL Capital cautions that concentrated exposure to top clients and to the US market, a potential elongation of product sales cycles, and any renewed rise in talent/R&D costs could test near-term margins and defer the improvement path. Rapid shifts in AI platforms and open-source alternatives may also require sustained reinvestment, the brokerage said.
“Fractal has demonstrated consistent revenue performance and robust client stickiness; we see scope for steady EBITDAM expansion as product mix improves and ESOP impact normalises,” PL’s analysts wrote.
Highlights of PL Capital Report on Fractal Analytics
- Rating/Target: Buy; TP INR 1,260; valuation at 22x FY28E EV/EBITDA (PL research, 16 Feb 2026)
- Implied upside: ~40% versus report CMP ₹900; stock at INR 889 at 12:02 PM on 17 Feb 2026 (NSE data)
- Growth CAGRs (FY26E–FY28E): USD revenue 19.3%; INR EBITDA 30.9%; INR PAT 44.5%
- Margins: EBITDA margin to rise from 12.7% in FY25 to 17.0% by FY28E
- FY25 print: Revenue INR 2,765 crore; EBITDA INR 350 crore; adjusted PAT INR 196 crore
- Moat markers: ~98% client retention, 120%+ NRR, NPS ~77; RGM/optimisation ~40% of revenue
- Alpha roadmap: Break-even by FY27E; ~25% segmental margin by FY28E; agentic-AI platform Cogentiq
Conclusion
PL Capital report on Fractal Analytics frames the company as a scaled, AI-first partner with improving unit economics and a growing product layer that can lift margins and cash generation through FY28. The earnings upgrade cycle, if sustained alongside disciplined R&D and sales investment, could support re-rating; equally, client and geographic concentration, and the pace of product monetisation, bear watching.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult your financial advisor before investing.