Shares of mid-cap IT player Coforge rose 4% intraday on April 28 despite a 48% year-on-year consolidated net profit drop to Rs 117 crore. The company’s operating income rose 25% to Rs 2,170 crore in Q4FY23.
“We believe there are two key accomplishments to our performance this quarter. The first is a 5% sequential quarterly increase in US dollars. The second major milestone is that the company crossed the $1 billion mark in revenue. Our performance entering FY24 provided us with It is well positioned for strong growth,” said CEO Sudhir Singh.
Foreign brokerage firm Jefferies has upgraded the stock to “hold” with a target price (TP) of Rs 3,760 and said that fourth-quarter revenue was in line with their expectations, but profits were below expectations. Steady deal wins are in line with FY24 growth guidance, it said, adding that growth investments will limit margin expansion. The brokerage has raised its FY24 forecast by 4% but lowered its FY25 indicated by 2%.
The company won $301 million TCV (Total Contract Value) in Q4FY23, flat year-over-year, including two large deals.
“Two mega-deals signed in Q4 and 11 mega-deals in FY23 are expected to deliver sustainable and predictable growth in FY24. The overall deal pipeline remains healthy across its client base without any meaningful instances of deal deferrals or spending cuts, said brokerage Motilal Oswal. Motilal Oswal has a “neutral” rating on the stock with a target price of Rs 4,290.
However, the brokerage was disappointed by its margin performance, which rose by 110 basis points quarter-on-quarter, against expectations of 200 basis points. This is primarily due to disciplined investment in building S&M teams, technology and functional capabilities, adding that management indicated it would continue to spend on S&M (throughout FY24) to support incremental growth and get more wallet share from each of the strategic accounts.
The company has guided for FY24 gross margin growth of 50 basis points. Adjusted EBITDA margins were flat year-over-year and targeted organic revenue growth in the 13-16% year-over-year CC (constant currency) range.
JM Financial has a “buy” call on the company but has lowered its target price to Rs 4,620 from Rs 4,790 earlier.
Elara Securities, on the other hand, has raised its target price to Rs 5,360 from Rs 5,280 earlier.
Coforge’s market capitalisation has increased by more than 16% in the past month. Shares were up 3.34% at Rs 4,186.75 at 2:27 pm, with the benchmark Nifty IT up 1.05% at 27,642.35.