“Coforge displays many traits of a well-run, ambitious mid-tier firm and can scale up to be a credible challenger and ensure consistent and healthy growth,” said a report by Kotak Institutional Equities.
The report further stated that the analysts at Kotak expect a strong 20.2% EPS CAGR in FY2024-27E, which is powered by a 12.3% organic revenue CAGR and a 150-bps EBIT margin expansion.
Healthy revenues are expected with growth in the long run from considerable acquisition of new clients, share gains in existing accounts and expansion of the addressable market.
Also read: JM Financial initiates coverage on MapmyIndia, sees upside potential of 28%“Coforge’s EBIT margin of 12.5% and adjusted net profit margin of 9% in FY2024 are lower than Indian mid-tier IT peers and have room to expand. Higher ESOP costs in FY2025E will postpone the timeline of improvement to FY2026E,” said Kawaljeet Saluja, analyst at Kotak Equities.The company has the potential to achieve gross margin improvement and better profitability for the loss-making India and AdvantageGo businesses.However, leadership churn, high vertical concentration, M&A integration and ensuring checks and balances in governance, especially given the lack of a promoter entity, have been listed as the key risks by the domestic brokerage firm.
Coforge shares have given 15% returns to its investors in the last 1 year while in the last 6 months and the current year so far, the stock has declined by 14% and 12.5%, respectively.
The shares of Coforge were trading 1.7% higher at Rs 5,411 around 3 pm on BSE on Thursday.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
