Coforge gains on healthy Q1 earnings; brokerages upbeat

Brokerages also have a positive view on Coforge thanks to its robust growth potential. However, some brokerages feel the stock’s valuation, which factors in the growth potential, may hinder a strong upside from current levels.

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Coforge shares gained 1 percent in early trade on July 21 following its earnings report for the April-June quarter. Despite challenging macroeconomic conditions in the IT sector, the company maintained its growth guidance for FY24.

The mid-cap IT player’s revenue increased 2.4 percent in the first quarter of FY24 to Rs 2,221 crore against 2,170 crore in the previous quarter. However, the company’s net profit grew 43.9 percent to Rs 165.3 crore, largely due to a lower base as it had to provide for an exceptional expense of Rs 52.3 crore in the preceding quarter.

On a year-on-year basis, revenue grew 21.4 percent, while its net profit was up 10.4 percent. Moreover, the company also maintained its revenue guidance for the year at the previous range of 13-16 percent.

At 09.22 am, shares of Coforge were trading around one percent higher at Rs 4,854.25 on the NSE.

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Factoring in Coforge’s quarterly performance, most brokerages retained their positive stance on the company.

HSBC raised its price target for the stock to Rs 5,640 while maintaining a ‘buy’ call on the stock. The firm sees the company’s robust executable order book securing it in the short term while strong TCV (Total Contract Value) and large deals set it up for the medium-term. The brokerage also likes the stock for the growth it offers.

Nomura also has a ‘buy’ call on Coforge with a price target of Rs 5,300. The brokerage expects margins for Coforge to recoup this fiscal and also predicted that its AI (Artificial Intelligence) segment will turn net positive on revenue in the medium term.

Also Read: Coforge Q1 result: Revenue rises 2.4% sequentially; declares interim dividend

On the other hand, Nuvama Institutional Equities has an even more bullish outlook for Coforge as it foresees it outperforming peers, backed by its strong positioning in the digital transformational space, ability to win large deals and favourable portfolio mix. Also, the firm feels the stock is attractive at its current valuation, given that it is trading at a discount to rival Persistent Systems. The broking firm has a ‘buy’ call for Coforge with a target of Rs 5,520.

However, brokerages Jefferies and Motilal Oswal Financial Services have a contrasting view on Coforge’s valuations. Both the brokerages feel the valuation is rich and already factors in the robust growth potential of the company. Likewise, they do not expect much upside from the current levels and hence have a neutral stance on the stock. MOFSL has assigned a price target of Rs 4,460 for Coforge, while Jefferies has a target of Rs 4,550.

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