Motilal Oswal's research report on Coforge
Coforge Ltd (COFORGE) reported 3QFY23 revenue growth of 3.7% QoQ in constant currency (CC) terms, below our estimates of 4.4%. Reported revenue stood at USD251.7m (up 1.9% QoQ/13.6% YoY). Growth was led by the TTH segment, up 1.9% QoQ, while BFSI remained flat and Insurance declined 2.9% QoQ. The company reported order intake of USD345m (the highest ever), up 13.4% QoQ with a 12-month executable order rising 5.0% QoQ to USD841m. EBITDA margin (pre-RSU) of 18.5% (up 10bp QoQ) significantly missed our estimated improvement of 110 bp QoQ. Q3 performance was adversely affected by seasonality and higher furloughs impact in the Insurance and mortgage (BFS) segments. However, the demand environment remained strong, evidenced by robust order booking, which is expected to support the growth momentum in FY24. The building optimism around strong demand and revenue visibility instill confidence and the management raises the earlier guidance of 20%+ YoY CC to 22% YoY CC growth. The raise implies ~3.5% QoQ CC growth in Q4, which we believe is achievable.
Outlook
We believe the robust outlook is already factored into the price and we do not see any potential upside from here on. Our TP of INR4,040 implies 23xFY24E EPS. We reiterate our Neutral rating on fair valuations .
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