Hold Coforge; target of Rs 2421: Arihant Capital

Arihant Capital 's research report on Coforge

Coforge Limited ( Coforge) (erstwhile NIIT Tech) Q2FY21 earnings were below our estimates on all fronts. Consolidated revenue stood at Rs 11,537 mn, below our estimate of Rs 11,890 mn, registering a growth of +9.1% QoQ /+11.1% YoY amid broad based growth across all verticals . Consolidated EBITDA stood at Rs 2048 mn, up by by 21.5% QoQ /7.9% YoY. On the margins front, EBITDA margin contracted by 52 bps YOY but expanded by 180 bps QoQ to 17.8% backed by higher utilization, cost rationalization and growth in topline. Consolidated PAT stood at Rs 1207 mn, below our estimate of Rs 1348mn, registering growth of 51.1% QoQ/1% YoY. Q0Q growth in PAT was mainly due to lower depreciation & tax expense.

Outlook

We value Coforge Limited at P/E of 27x to its FY22E EPS, which yields target price of Rs 2,421 per share. We assign Hold rating on the stock.

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