Prabhudas Lilladher has given Buy recommendation for Coforge with a target price of Rs. 3762 in its research report issued on May 06, 2021

Prabhudas Lilladher’s research report on Coforge

Coforge surprised us with strong beat on revenue growth of 5.1% QoQ CC, 7.1% QoQ USD, much above (+310bps) our estimates (Ple: 4% QoQ USD). Strong growth in three consecutive quarters despite 28% (pre-covid) exposure to worse affected travel sector resulted in 6% YoY CC growth, exactly in-line with their guidance for FY21. Coforge’s strong and niche capabilities in BFS, Insurance and Others led to very strong growth ex-Travel at 18.4% YoY CC in FY21. Travel is expected to rebound sharply in FY22 given 1) two large deal wins in Travel in 4Q 2) significant number of enquiries in cloud, cyber security, hi-tech touch less operations and 3) potential surge in travel in 2HFY22 due to large scale vaccinations.

Outlook

We anticipate revenues to grow by 31.6% YoY USD in FY22E led by 18% YoY USD growth in organic revenues and $85 mn (+16% YoY growth over FY21 revenues of ~$73 mn) contribution from SLK Global. We assign 27X (earlier 23X) multiple for Coforge to arrive at a TP of Rs.3762 (earlier Rs3051) valued on FY23 EPS of Rs.139.3.

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