Coforge share price: Can this IT multibagger regain lost mojo post Q3 results?


NEW DELHI: Multibagger Coforge, which has been in bear grip lately, rallied post its December quarter results. While the IT firm may have reported solid results for FY22, high base may play spoilsport in FY23, analysts said.

The scrip soared 8 per cent on Friday after falling around 28 per cent over its record high levels of Rs 6,133 hit on January 4. Over the last five years, the scrip has delivered over 1,000 per cent return and that includes the recent slide.

Analysts were mostly cautious, thanks to valuations that still look rich in relative terms.

The IT firm reported over 50 per cent YoY rise in December quarter net profit at Rs 183.7 crore and said its revenue climbed to Rs 1,658.1 crore from Rs 1,190.6 crore in the year-ago quarter. Adjusted Ebitda margin at 19.5 per cent was in the last ten years. The management increased its revenue guidance to 37 per cent in constant currency terms and expects adjusted Ebitda for the year to grow at 44 per cent.

Motilal Oswal said it has upgraded its FY23-24 EPS for the stock by 3-4 per cent on lower amortisation costs but trimmed its FY22 EPS by 3 per cent on a lower margin expectation in the March quarter. On a net basis, the brokerage has a target of Rs 4,760 on the stock based on 26 times FY24 EPS.

The scrip hit a high of Rs 4,825.50 on Friday.

Motilal Oswal said Coforge should continue to deliver a little ahead of its Q4 implied growth on account of support from seasonality and growth recovery in segments such as SLK and AdvantageGo (Insuretech), which were weak in Q3.

“While it would deliver a very strong performance in FY22, we expect growth to be pressured by the high base effect next year, despite strong demand tailwinds and a healthy pipeline. We expect the company to report an FY22–24 dollar revenue CAGR of 20 per cent, marginally trailing peers,” Motilal Oswal said.

Emkay Global has retained its ‘Hold’ on the stock with a target of Rs 5,300 based on 34 times December 2023 EPS. It said that the target took into account the rich valuations on a relative basis, despite the recent fall.

The IT firm reported a 23 per cent sequential growth in BFS vertical. Growth for transport vertical stood at 6 per cent while that of manufacturing at 3 per cent sequentially.

On the geographical front, North America, which accounts for just over half of revenues, saw 8 per cent sequential growth. EMEA, which accounts for 35 per cent of revenue, saw a de-growth of 3 per cent QoQ.

Axis Securities said the Q3 numbers were below its expectations but maintained its ‘buy’ call on the stock with a target of Rs 5,060.

The most bullish call on the counter came in from Edelweiss which expects Coforge to be one of the key beneficiaries of cloud and digital-led demand. This brokerage has a target of Rs 7,357 on the stock based on strong growth and rollover to Q1FY24 projections.

Coforge has a robust business structure coupled with multiple long-term contracts spread across verticals which will help it generate sustainable growth momentum moving ahead.



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