Target: ₹5,615
CMP:₹4,999.55
In Q2FY24, Coforge reported revenue of ₹2,276 crore, up 2.5 per cent q-o-q and 2.8 per cent q-o-q (in CC terms) which stood above our expectations. The company’s operating profit stood at ₹347 crore, up 4.8 per cent q-o-q due to moderated operating expenses. Its operating margins improved by 30bps to 15.3 per cent, which was largely led by moderated operating expenses as well as due to higher utilisation during the quarter. The company posted a net profit of ₹181 crore in Q2FY24, registering an excellent growth of 9.5 per cent on a QoQ basis.
The management has maintained revenue growth guidance for FY24 at 13-15 per cent in CC terms. Moreover, margin guidance has been retained at 17 per cent. The management is confident of gaining medium-term demand momentum on the backdrop of the deals it has won in the previous quarters. It also expects improvement on the margin front moving forward.
From a long-term perspective, we believe Coforge is well-placed for growth given its multiple long-term contracts with the world’s leading brands. Better revenue visibility gives us confidence in the company’s business growth moving forward.
We recommend a BUY rating on the stock and assign a 24x P/E multiple to its FY25 earnings of ₹238.7/share to arrive at a TP of ₹5,615.