Buy Coforge; target of Rs 5778: Prabhudas Lilladher

Prabhudas Lilladher's research report on Coforge

Coforge reported revenue growth of +4.2% USD QoQ (Ple: 3.5%, Cons: 5%). Organic growth is healthy at +4.6% QoQ USD, 5.7% QoQ CC and contribution from SLK is ~$22.4 mn flattish on QoQ basis due to lower number of billing days in Q3. Order intake is healthy at $247 mn (29% YoY, vs FY21 average of ~$195 mn) including one large 6-year deal of $45 mn from European Public sector client. Next 12 months’ executable order book is $701 Mn, +2% QoQ, 40% YoY. Strong growth momentum is expected to continue in FY23 given strong deal pipeline, ability to win large deals, strong client mining efforts, increased investments in sales and bounce back of tech spends in Travel. Coforge increased consolidated revenue growth guidance to 37% YoY CC in FY22 vs 35% guided earlier. Management mentioned that organic revenue is expected to grow 24% YoY CC and SLK to grow at par with organic business (~22-23%) YoY CC in FY22. (only 11 months’ revenue of SLK will consolidated in FY22). Guidance is largely in-line with our estimates and implies overall revenue growth of 3.5-4% QoQ USD in Q4FY22.

Outlook

Our EPS estimates increase by 2.2%/1.7% for FY23/24 led slight increase in margin estimates. We arrive at DCF based TP of 5778 from earlier Rs. 5708 (implying target multiple of 34x on FY24 EPS). At CMP, stock trades at 30x/26x on FY23/24E EPS of INR 145/172 with Revenue and EPS CAGR of 16%/23% respectively over FY22-24. Reiterate BUY.

More Info

At 16:00 hrs COFORGE LIMITED was quoting at Rs 4,828.00, up Rs 37.75, or 0.79 percent.

It has touched an intraday high of Rs 4,863.65 and an intraday low of Rs 4,761.70.

It was trading with volumes of 29,032 shares, compared to its thirty day average of 16,203 shares, an increase of 79.18 percent.

In the previous trading session, the share closed down 0.39 percent or Rs 18.65 at Rs 4,790.25.

The share touched its 52-week high Rs 6,133.00 and 52-week low Rs 2,325.60 on 04 January, 2022 and 01 February, 2021, respectively.

Currently, it is trading 21.28 percent below its 52-week high and 107.6 percent above its 52-week low.

Market capitalisation stands at Rs 29,404.04 crore.

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