Powered by: Motilal Oswal
2025-06-01 05:44:44 pm | Source: Choice Broking Ltd
Buy Coforge Ltd For Target Rs. 10,765 - Choice Broking Ltd
Buy Coforge Ltd  For Target Rs. 10,765  - Choice Broking Ltd

Revenue misses estimates, EBITM beats by 50bps, PAT exceeds expectations

• Revenue for Q4FY25 came at INR 34.1Bn, up 47.1% YoY & 4.5% QoQ (vs consensus est. at INR 35.2Bn).

• EBIT for Q4FY25 came at INR 4.5Bn, up 32.0% YoY & 14.6% QoQ (vs consensus est. at INR 4.4Bn). EBIT margin was down 148bps YoY but up 113bps QoQ to 13.2% (vs consensus est. at 12.7%).

• PAT for Q4FY25 stood at INR 2.9Bn, up 31.9% YoY & 36.9% QoQ (vs consensus est. at INR 2.8Bn).

Coforge nears USD 2Bn goal with record USD 3.5Bn FY25 order intake:

Coforge marked FY25 as milestone year, securing a record USD 3.5Bn in order intake, a 75.1% YoY increase, driven by 14 large deals, 5 in Q4 alone. Notably, USD 2.1Bn was booked in Q4FY25, matching FY24's full-year intake. Coforge anticipates strong FY26 growth, supported by a solid order book and robust deal pipeline. Management expects continued organic growth, with large deals closing soon, maintaining FY25 momentum despite macroeconomic uncertainties. Solid deal wins & an expanding order book reinforce the company to meet its mediumterm revenue goal of USD 2Bn sooner than anticipated. Recent acquisitions, such as Cigniti, enable cross-sell and upsell opportunities, further fueling growth. However, we anticipate delays in deal execution for sectors impacted by US tariffs, such as Retail & Travel. With 18% exposure to Travel, caution is expected due to geopolitical & economic factors, which may potentially affect short to mid-term topline growth. However, as global challenges ease, Coforge is likely to gain momentum in GenAI-led transformation deals, especially in the Travel sector, where it holds a leading market share.

14% EBIT margin target by Q4FY26 amid structural gains & cost optimizations:

FY25 exit EBIT margin stood at 13.2% in Q4, showing a 123bps QoQ expansion. The company is focused on improving margins over the next 2 years, aiming for a 14% EBIT margin by Q4FY26. Key drivers of this growth include structural changes & economies of scale. Additionally, a 100bps reduction in ESOP costs by H2FY26 & sale of Advantage Go business, which had a 50bps margin impact (now complete), will also contribute to EBIT growth. We anticipate a conservative EBIT margin expansion of up to 13.4% in FY26E owing to elevated visa costs, wage hikes seasonality, & market challenges as these factors, especially in H1FY26, could impact topline performance & quarterly margins. Headcount growth for large deal ramp-up started in Q3FY25, with significant additions expected in upcoming quarters. Attrition remains industry-low, with the 12-month rate dropping to 10.9%.

View and Valuation:

Despite current macro headwinds, Coforge expects strong growth across business segments, driven by recent acquisitions & key deal wins. While near-term conditions may mildly impact key sectors, we have marginally reduced our estimates by 1–3% and adopted a conservative view on margin expansion. We project Revenue/ EBIT/ PAT to grow at a CAGR of 22.1%/ 31.0%/ 49.0% over FY25–27E. We maintain our rating to BUY with a downward revised target price of INR10,765, implying a PE multiple of 40x (maintained) based on FY27E EPS of 269.1.

 

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer

SEBI Registration no.: INZ 000160131

Disclaimer: The content of this article is for informational purposes only and should not be considered financial or investment advice. Investments in financial markets are subject to market risks, and past performance is not indicative of future results. Readers are strongly advised to consult a licensed financial expert or advisor for tailored advice before making any investment decisions. The data and information presented in this article may not be accurate, comprehensive, or up-to-date. Readers should not rely solely on the content of this article for any current or future financial references. To Read Complete Disclaimer Click Here