Buy Coforge; target of Rs 5000: Sharekhan

Sharekhan's research report on Coforge

The company highlighted the strategy and growth equations as it aims to double revenues within next five years to $2 billion by scaling up key accounts and new verticals, using partnership-led growth and acquisitions. Management stated that client interactions indicate that demand is more uncertain than earlier assumed. Company is not expecting a rebound in H2FY24 and highlighted tougher demand environment for BFS vertical. Despite grim demand environment, the management reiterated its FY24 CC revenue guidance of 13-16% and added that they expect a 50-bps rise in gross margins in FY24, which reflects management’s confidence on the revenue visibility for FY24 given the consistent deal intake and a strong executable order book. We believe management focus on scaling and mining of key accounts, expansion and strengthening of existing partnerships and logo additions besides consistent deal intake will continue to drive performance.

Outlook

Hence, we maintain Buy on Coforge with revised PT of Rs 5,000. At CMP, the stock trades at 27.9/23.4x its FY24E/ FY25E EPS respectively.

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