Prabhudas Lilladher's research report on Coforge
Coforge reported strong growth of 16% QoQ USD in 1Q22, much above our (~400bps) & cons estimates (~600bps) on top of high base in 4Q21. Beat was led by strong growth in organic business at 7.6% QoQ USD (Ple: 4%). Inorganic business contributed $14.6 mn (Ple: $12 mn). Management raised organic growth guidance to ‘atleast’ 19% YoY CC for FY22 from earlier 17%. This guidance is conservative implying 1-2% growth for next three quarters. However, we believe that organic growth will be ~24% YoY USD in FY22 given 1) record organic order intake of $318 mn, +58% QoQ and next 12-months executable order book of $645 mn 38.7% YoY 2) sustained strong large deal momentum with $105 mn milestone win this quarter, 3) Increased recognition in product engineering, 4) strengthening of sales team in other vertical (manufacturing, retail, healthcare etc.), 5) recovery of travel (especially in Europe and UK).
We value Coforge on Sep-23 EPS (roll over) of INR 160.8 to arrive at a TP of Rs.5306 (earlier Rs 4327). At CMP, stock trades at 40x/32x FY22/23E EPS of INR 117.8/148.9. Reiterate BUY.
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