Stock in Action - Coforge 23 October 2024

Highlights

1. Coforge's share price has gained over 21.06% year to date in 2024 including today’s 10% gain.

2. Coforge' financial performance has increased over the past year with operating profit increasing from ₹1282 crores in March 2023 to ₹1486 crores till TTM 2024.

3. Coforge quarterly earnings report highlighted an improvement in net profit in the September quarters.

4. Analyst has given a buy rating to Coforge with a target price of ₹8480. Currently stock is treading at ₹7,498.50 per share.

5. Coforge's order book set to be executed over the next 12 months reached $1.3 billion showing a strong 40% growth compared to the same time last year.

6. Coforge stock has outperformed the market by delivering just 52% returns in the last year.

7. Coforge is currently trading at ₹7,498.50 showing a 10.27% increase as of 11:46 pm on NSE.

8. Coforge has a strong Return on Equity (ROE) of 24.1% and a Return on Capital Employed (ROCE) of 28.6%.

9. Coforge posted a net profit of ₹255.20 crore in the September quarter up 9% from ₹234.60 crore in the previous quarter.

10. As per the September quarter filings the company has a 0% promoter holding, 48.15% DII holding and 42.09% foreign institutional investor (FII) holding.

Why is Coforge Share in News?

Coforge share price surged by over 12% on 23 October following the release of strong results for the quarter ended September 2024. The company reported a consolidated net profit of ₹233.6 crore marking a 24.2% increase YoY from ₹188 crore in the same period last year.

Additionally, its consolidated revenue from operations rose by 36.5% YoY to ₹3,118.6 crore up from ₹2,285 crore in Q2 FY24. In constant currency terms, revenue saw a QoQ increase of 26.3% and a YoY rise of 33%.

The company's order book which is executable over the next 12 months reached $1.3 billion, indicating a robust 40% YoY growth. Coforge's order intake for the quarter stood at $516 million, which included three large deals, marking the eleventh consecutive quarter where order intake surpassed $300 million.

Furthermore, the company added 13 new clients during this period, enhancing its market presence. Earlier in May, Coforge announced its plan to acquire a 54% stake in Cigniti Technologies at ₹1,415 per share in a deal valued at $220 million. This strategic acquisition, aimed at helping Coforge achieve $2 billion in revenue, received approval from the Competition Commission of India in June 2024 and was successfully completed during the second quarter.

Management Outlook

Coforge's management remains optimistic about the company's future growth. CEO Sudhir Singh highlighted several positive indicators including 27% sequential dollar growth, a 6.3% increase in organic business, EBITDA expansion and a strong pipeline of large deals. We expect strong and sustained growth in the upcoming quarters, Singh said in an exchange filing, further boosting investor confidence.

About Coforge

Coforge is a global IT services company specializing in digital transformation, technology solutions and business process outsourcing. With a strong focus on sectors like banking, insurance and travel, Coforge delivers customized solutions that enhance efficiency and innovation for its clients. The company’s capabilities span cloud services, artificial intelligence, automation and data analytics. Headquartered in India, Coforge has a global presence with offices across key markets. Recent growth has been driven by acquisitions including Cigniti Technologies and a consistent stream of large deals. Coforge is known for its robust order book, expanding workforce and client centric approach.

Coforge is ranked among the top 20 software exporters in India. Its notable global clients include British Airways, ING Group, SEI Investments, Sabre and SITA. Over the years, Coforge has established subsidiaries in US, Singapore, Australia, UK, Germany and Thailand to help market its services and manage software projects. Additionally, the company has formed partnerships with major IT firms worldwide to enhance its business reach and capabilities.

Conclusion

Coforge's impressive financial performance including a 24.2% year on year increase in net profit and a robust order book growth of 40%, highlights its strong market position. The company's focus on digital transformation and strategic acquisitions such as Cigniti Technologies, enhances its growth prospects. With a significant year to date share price increase of 21.06% and positive analyst ratings Coforge is well positioned for sustained success. The management's optimistic outlook combined with a diverse global client base and solid operational metrics further solidifies Coforge’s reputation as a leading player in the IT services sector.