Emkay Global Financial' research report on Coforge
For Q2FY23, Coforge’s operating performance was broadly in line with our estimates; however, lower ETR led to beat on the profit front. BFS grew in double digits sequentially in constant currency (CC) terms for the second quarter in a row, reflecting strong deal momentum and resilient demand. Management remains watchful of evolving macro situations and is cautiously optimistic on the growth outlook. Management expects usual furloughs in Q3FY23. The company has retained at least 20% CC YoY revenue growth guidance for FY23, considering healthy deal intake, NTM order book (USD802mn, 16.6% YoY), and a strong deal pipeline. Management has also retained its adjusted EBITDAM (ex-ESOP and acquisition costs) guidance of 18.5-19% for FY23. Management is confident that it will attain ~USD1bn revenue run-rate in FY23 and has its eyes set on achieving USD2bn revenue run-rate in the next five years. We have raised our EPS estimates by 3.6-4.3% over FY23E-25E, factoring in Q2 performance.
Outlook
We retain Hold with a TP of Rs3,550 (Rs3,400 earlier), at 21x Sep-24E EPS, considering limited upside risks and the overhang of further stake sale by Baring.
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