Coforge share price declines 9% post Q4 earnings performance: Should you sell or Hold the stock?
Coforge Ltd corrected by more than 9% during the morning trades on Friday. Coforge Ltd had posted Q4 earnings performance on Thursday post market hours. The net profit of Coforge Ltd Coforge reported net profit increased by 95% to ₹224 crore for the quarter ended March'2024.
For the three months ended March 31, consolidated sales increased 8.7% year over year to ₹2,359 crore, The performance however missed estimates of some analysts Analysts at Jefferies India Pvt Ltd reacting to results said that there was an all around miss in performance. Coforge's 4QFY24 revenues of US$287 million (rising 1.9% sequentially in constant currency terms), a 65bps sequential rise in EBITDA margins, and normalized profit of Rs2.3 billion, all were both below expectations, said analysts at Jefferies. The main negative surprise in the results was the slower-than-expected margin expansion as per Jefferies.
Top-5 customers and Banking Financial Services (up 6.4% sequentially) were the primary drivers of rev growth. The IT companies see slowdown in spending by clients leading to uncertainties over revenue and profitability outlook. At $775 million, Coforge's fresh order intake was robust, bolstered by two significant agreements.
However a significant negative surprise was that Coforge did not provide growth guidance for FY25 which as per analysts at Jefferies implies increased demand uncertainty. Amid moderating growth and repeated disappointment on margins, a large acquisition as per Jefferies adds another layer of execution risk, warranting a derating. Coforge has signed a definitive agreement to take over Cigniti Technologies Limited.
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