Reduce Coforge; target of Rs 6200: Emkay Global Financial

Emkay Global Financial recommended reduce rating on Coforge with a target price of Rs 6200 in its research report dated July 23, 2024.

Broker Research

July 24, 2024 / 13:13 IST

reduce

Emkay Global Financial's research report on Coforge

Coforge reported an in-line set of results in Q1; revenue grew 1.6% QoQ (similar in cc terms), whereas adj. EBITDAM declined by 100bps to 17.9%. Growth ex-India was healthy at 3.7% QoQ cc. BFS declined 3.9% QoQ, which the management attributed to a blip after 12 straight quarters of sequential growth, and should grow Q2 onward. The mgmt expects robust growth ahead, aided by a healthy NTM executable order book (up 19.3% YoY), some rebound in demand, and strong headcount addition (billable headcount grew 7.7% QoQ). It also expects adj. EBITDAM to improve by 50bps in FY25 versus FY24. The management not only sees demand bottoming out, but picking up too, albeit recovery being slightly tepid.

Outlook

Coforge will consolidate Cigniti financials from Q2FY25. We hike our target multiple to 30x (from 28x) to capture increased probability of demand uptick. We tweak FY25-27E adj. EPS by 0.4- 3.1%, factoring in the Q1 performance and M&A. We maintain REDUCE on Coforge, upping our TP to Rs6,200/share at 30x Jun-26E EPS.

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