Nomura has initiated coverage on Coforge, an information technology company, with a buy rating, and a target price of Rs 5,050, which is a potential 17-18 percent upside from current levels. The brokerage house believes that the management change brings in rigour and focus on execution.
According to Nomura, the investment in technology will help improve the competitive intensity for Coforge going forward.
The firm expects 180 basis points (bps) margin expansion over FY23 and FY25 and during the same period Coforge is expected to witness a compound annual growth rate (CAGR) of 25 percent.
The key risks are slow execution, growth is expected to slow down, and a bit of impact on margins, but the biggest risk to the stock would be an overhang of Baring PE selling its stake in the company.
However, in terms of earnings and execution, Nomura believes the risk-reward is favourable and, hence, it is initiating coverage with a buy rating and a target price of Rs 5,050 on Coforge.
Also Read | Coforge raises FY23 revenue growth guidance to 22% after highest-ever order intake in Q3
The company has raised its revenue guidance for the financial year 2022-2023 to 22 percent from 20 percent after the firm witnessed the highest-ever order intake.
The firm registered a 5 percent sequential growth in revenue from October to December 2022 at Rs 2,055.8 crore, though it missed the CNBC-TV18 poll estimate. The tech company’s net profit came in slightly higher than CNBC-TV18 projections of Rs 225.3 crore.
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