Shares of Coforge, an Indian IT firm, fell marginally by 0.84 percent to Rs.4,321 apiece in Tuesday's trade after gaining 9.90 percent in the previous two trading sessions. The stock witnessed a sharp rally after the company posted better-than-expected earnings for Q3 FY23 and strong deal wins.
In the last one month, the stock has rallied from ₹3,735 apiece to its current level of ₹4,321, producing a return of 15.68 percent. The Nifty IT index has risen 7.37 percent during the same period. The stock gained 11 percent in the last week alone, accounting for the majority of its gains this month.
After hitting an all-time high of Rs. 6,135 apiece on January 04, 2022, the stock experienced selling pressure and plummeted 48 percent in the following six months to June. However, it started recovering in October last year and has surged nearly 28.65 percent since then. The stock, at current levels, is trading at a nine-month high.
On January 20, Coforge posted a 24 percent increase in its consolidated net profit to ₹228 crore for the December quarter. The company posted a net profit of ₹183 crore in the year-ago quarter.
The revenues of the company came in at Rs. 2,087 crore in Q3 FY23, a growth of 25.57 percent compared to Rs. 1,662 crore during the same period of the previous year.
The company’s operating profit stood at ₹380 crore, a healthy growth of 5.5 percent on a QoQ basis. The management revised its organic CC revenue growth guidance for FY23 to 22 percent.
The company said that last-twelve-month (LTM) attrition was down 60 basis points quarter on quarter to 15.8 percent.
Coforge has signed the highest-ever number of deals in Q3 FY23. The company recorded order bookings of over $345 million, up 40 percent YoY. The company indicated the growth momentum is likely to sustain in FY24 on the basis of the execution of five large deals during the quarter.
The company stated that there are some areas in the market that are being affected by macro issues, but so far, they are largely insulated from the pain.
Following the company's strong results, domestic brokerage firm Axis Securities has maintained its "buy" call on the stock with a target price of ₹4,715 apiece.
"From a long-term perspective, we believe Coforge is well-placed for encouraging growth, given its multiple long-term contracts with the world’s leading brands. "Richer revenue visibility gives us confidence in its business growth moving forward," said the brokerage.
However, the brokerage stated that the rising concerns over the prospects of large economies, along with prevailing supply-side constraints, pose uncertainties over the company’s short-term growth rates.
Another brokerage firm, ICICI Securities, also maintained its "buy" rating on the stock with a target price of Rs. 4,870 apiece.
Bottoming out in the travel vertical (in the United States), preferred partnerships with Fortune 500 insurance and Tier 1 banking companies, and a recent acquisition will drive a 17.6 percent revenue CAGR over FY22–25E, said ICICI Securities.
22 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
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