Jefferies Raises Coforge’s Target Price to ₹6,580, Backs Strategic Margin Enhancement Initiatives

Jefferies Raises Coforge's Target Price to ₹6,580, Backs Strategic Margin Enhancement Initiatives

VoM News Desk | December 11, 2023 | 06:32 PM IST | Breaking News | Follow on Google News

Jefferies Raises Coforge’s Target Price to ₹6,580, Backs Strategic Margin Enhancement Initiatives Image/Coforge

Jefferies Raises Coforge’s Target Price to ₹6,580, Backs Strategic Margin Enhancement Initiatives

Jefferies, a global brokerage firm, has revised Coforge’s target price from ₹6,250 to ₹6,580, maintaining a ‘buy’ recommendation.

This decision stems from Coforge’s strategic endeavors to improve margins by 150-300 basis points over the upcoming 3-4 years through cost optimization measures.

During Monday’s intraday trading session on December 11, Coforge’s stock surged by 1.81%, reaching ₹5,906 per share on the NSE.

The management acknowledged persistent macroeconomic challenges in the third quarter but highlighted the acquisition of new projects, indicating a potentially better outlook for the fourth quarter.

Particularly, these secured deals are mainly concentrated within the banking and insurance sectors, with fewer developments in the travel segment.

Coforge is anticipated to meet the lower end of its growth guidance for FY24, projected between 13% to 16% YoYcc.

Despite uncertainties surrounding the CY24 budget, management remains optimistic that FY25 growth will mirror the figures observed in FY24, even without noticeable improvements in the demand environment.

According to Jefferies’ report, Coforge’s executable order book guarantees substantial growth visibility, encompassing only deals where clients have signed a Statement of Work (SoW).

Moreover, the company aims to expand its presence across Public Sector, Healthcare, HiTech, and Retail, striving to achieve a top-line revenue of $2 billion.

Jefferies emphasized Coforge’s management focus on delivering sector-leading growth, maintaining commitment despite promoter exits.

Additionally, with an industry-leading Employee Stock Ownership Plan (ESOP), the management remains incentivized to drive robust performance.

Coforge posted a 9.5% increase in net profit for the July-September period, amounting to ₹181 crore compared to the ₹165.3 crore reported in the preceding quarter of FY24.

The company witnessed a 2.5% sequential rise in revenue in constant currency terms, reaching ₹2,276.2 crore, attributed to strong order victories totaling $313 million in Q2, including three significant deals, marking the seventh consecutive quarter with an order intake exceeding $300 million.

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