Jefferies increases Coforge's target price, maintains ‘buy’ rating; stock zooms 2%

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Coforge from ₹6,250 to ₹6,580, while maintaining the 'buy' recommendation. This decision is grounded in Coforge's strategic initiative to enhance margins by 150-300 basis points over the next 3-4 years through cost optimization. Coforge stock gained 1.81% during an intraday trade on Monday, December 11 to ₹5,906 per share on NSE.

The management underscored the persistently challenging macroeconomic conditions in the third quarter. However, the acquisition of new projects indicates a potentially improved outlook for the fourth quarter. Notably, the secured deals are primarily within the banking and insurance sectors, with less traction in the travel segment.

Coforge is poised to meet the lower end of its growth guidance for FY24, ranging from 13% to 16% YoYcc. While the details of the CY24 budget remain uncertain at this point, the management anticipates that FY25 growth will align with the figures observed in FY24, even if the demand environment does not exhibit signs of improvement. “Coforge’s executable order book provides strong growth visibility and is iron clad given that they include only those deals where clients have signed a Statement of Work (SoW)," the brokerage firm said in its report.

Furthermore, the company intends to expand its presence in four new sectors—Public Sector, Healthcare, HiTech, and Retail—with the goal of achieving a top-line revenue of $2 billion. “Management is focused on delivering sector-leading growth and that focus remains so despite promoter exits. Furthermore, with one of the better ESOP plans in the industry, Coforge's management is well incentivized to deliver a strong performance," Jefferies said.