The research report on Coforge was written by Motilal Oswal.
Coforge reported revenue growth of 5.0% in constant currency and 4.9% in US dollars in the fourth quarter of FY22, ahead of our estimate. Growth was led by transportation, which grew by 15%. It reported an order intake of 301m, implying 1.3x book-to-bill, including oneUSD50m+ deal. The margin missed our estimate by 30bp. For FY23E, the management has set a margin of 18-19.0%. COFORGE should continue to deliver ahead of its FY23E revenue growth guidance of 20%, given its past history of conservative guidance. The strong demand environment, healthy order book, good deal momentum, and robust headcount addition in FY22 should help it deliver 20% CAGR over the next two years. With a strong exit to FY22 on EBITDA margin (20.4% pre RSU), COFORGE should deliver FY23E EBITDA margin of 19.4%, ahead of its guidance, despite elevated wage hikes. This will lead to an FY22 PAT CAGR of 29%.
Outlook.
The stock is currently trading at 20x earnings. We see limited upside at the current level because of the share sale from the promoter group. We maintain our estimates. 20x FY 24E earnings is what our TP is. We have a neutral rating on fair valuations.
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