Buy Coforge Ltd For Target Rs. 3,950 - Yes Securities
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Result Highlights
* Reported very strong revenue growth of 7.1% QoQ (up 5.1% QoQ in constant currency). In INR terms, it was up 6.0% QoQ (adversely impacted by INR appreciation during the quarter.
* The revenue growth was led by strong performance in Application Development and Management Practice. In terms of geographical split, there was some moderation in revenue growth in Americas, with slight uptick coming from EMEA.
* EBIT margin (excluding exceptional) increased by 63 bps despite higher hiring and INR appreciation in the quarter.
* Deal win continues to remain strong as new order intake grew by 7% QoQ to $201mn. 11 new customers were added in the quarter (11 also added in Q3FY21)
* Offshore revenue mix grew by 100bps QoQ to 39%, as per current industry trend.
* Utilization grew 210 bps QoQ to 81%, with employee attrition almost flat at 10.5% for the quarter. DSO improved by 5 days QoQ to 70 days in Q4FY21
Our view:
It delivered highest revenue growth among its peers along with sequential improvement in margin and is expected to sustain growth momentum led by robust deal pipeline. It is expected to achieve its guidance of 17% revenue growth (in cc terms) in FY22 and EBITDA margin guidance of 19%. Trades at 27.8x on FY23 earnings. Initiate coverage on the stock with BUY rating
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