Coforge stock surges 3% as Morgan Stanley initiates coverage with ‘overweight’ call
- Hot Stocks
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The brokerage has a target price of Rs 7,200 for the stock, an upside of 13 percent from the current market price
Earlier, Coforge shares hit 52-week high of Rs 6,528 per share on December 15, 2023
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Coforge surged 3 percent to Rs 6,338 on January 11 morning after global brokerage firm Morgan Stanley initiated coverage with an “overweight” call on expectations of higher revenue.
The brokerage set a target price of Rs 7,200, an upside of 13 percent from the current levels. The IT company’s scalability attributes would keep its revenue growth profile higher for longer against peers, analysts at Morgan Stanley said.
“We bake in revenue compounded annual growth rate (CAGR) of 14.7 percent over FY24-26 on a constant currency basis,” the brokerage said.
In the past three months, the stock has soared over 22 percent against a 7 percent rise in the Sensex.
Coforge hit a 52-week high of Rs 6,528 a share on December 15.
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Coforge’s valuations were at a premium but have the potential to sustain. “The company has strong potential to be driven by strong revenue growth and strong free cash flow conversion,” the analysts said.
ALSO READ: Jefferies raises Coforge’s target price amid cost-optimisation drive; shares gain
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Analysts at Elara Securities expect Coforge to have a soft December quarter. “We anticipate 0.7 percent sequential growth in revenue in constant currency (CC) terms in Q3FY24. This is mostly due to lower working days in Q3, and tepid demand in the BFSI business. We expect a cross-currency tailwind of 70 basis points sequentially,” the brokerage firm said.
Coforge’s adjusted profit-after-tax (PAT) is expected to grow 37 percent from the previous quarter to Rs 259 crore. Analysts expect margins to expand 208 basis points (bps) QoQ due to lower sub-contracting cost, operation efficiency and absence of wage hikes.
Key metrics to monitor are BFSI commentary, growth in the travel vertical, new deal wins and deal closure time and growth in offshoring, analysts at Elara Securities said.
Coforge’s will share the third quarter results on January 22.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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