Coforge bags target price hikes after strong Q2 show; revenue, margin outlook bright

Coforge stock has risen around 22 percent so far this year, outperforming Nifty's returns of 12 percent.

Coforge has emerged as the 'top midcap IT pick' for several analysts after its results for the quarter ended September 30, 2024. Brokerages cheered the strong earnings by reaffirming bullish calls or increasing their respective price targets on the stock.

Nomura maintained a 'buy' call on Coforge with a target price of Rs 8,480 per share, expecting double-digit revenue growth for FY25. The company's strong headcount additions and a solid 12-month executable order book provide confidence in its near to medium-term revenue outlook, it said.

Margins remain robust, and Nomura has raised its FY25-27 EPS estimates by 0.6-2.4%. The brokerage highlighted Coforge as its top midcap pick.

HSBC has raised its target price for Coforge to Rs 8,200 per share, reaffirming a 'buy' call. Both Coforge and Cigniti reported strong Q2 results, pointing to a positive revenue and margin outlook.

Coforge's robust organic growth is further supported by expected integration synergies in the coming quarters. Additionally, an open offer for an increased stake in Cigniti is set to commence on October 29, 2024, analysts noted.

Morgan Stanley has reiterated an 'Overweight' rating on the counter, raising its target price to Rs 8,000 per share. The firm highlighted Coforge’s higher revenue growth visibility compared to its peers, driven by a strong pipeline of large deals and continued headcount growth.

It also emphasized the company’s healthy EBITDA-to-operating cash flow conversion rate of 65-70%.

Follow our market blog to catch all the live action

According to Nuvama, Coforge’s Q2FY25 results have pacified almost all concerns, except margins. Despite widespread scepticism, the management has delivered on its promises – viz. organic revenue growth, revenue synergy, and Cigniti margin improvement.

The brokerage continues to see strong growth ahead for the company and believes in its ability to build a strong business franchise over the next few years. It retained a 'buy' call on the stock with a target price of Rs 8,650.

Meanwhile, Citi has issued a 'Sell' call on Coforge, with a target price of Rs 6,720 per share. While Q2 revenues exceeded expectations and growth was broad-based across verticals, Citi flagged margins that came in line.

Analysts acknowledged the importance of Coforge’s executable order book in driving future revenue growth and noted the 5.4% QoQ increase in headcount, which supports near-term growth. Despite these positives, Citi has revised its EPS estimates upward by 4-5% to reflect the consolidation of Cigniti.

In the previous session, Coforge shares surged to close 11.1 percent higher at Rs 7,555.45 on the National Stock Exchange (NSE). The stock has risen around 22 percent so far this year, outperforming Nifty's returns of 12 percent.

In the past 12 months, the counter has gained 54 percent. In comparison, Nifty rose 28 percent during this period.

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.