COFORGE SHARES CRASH 10% AS JEFFERIES HALVES TARGET PRICE FOLLOWING Q4 MISS

Shares of Coforge, which was earlier known as NIIT Technologies, fell nearly 10% on Friday to the day's low of Rs 4,505 on BSE after the IT company reported weak Q4 results in which both revenue and margin missed estimates.

Jefferies not only downgraded the stock to underperform but also slashed its target price by 44% to Rs 4,290 from Rs 7,650. The global brokerage has also warned of a de-rating as the acquisition of Cigniti Technologies adds another layer of execution risk.

Citi has also given a sell call on Coforge and reduced the target price to Rs 4,550, while InCred has also downgraded the stock to reduce rating and slashed the target price to Rs 4,431.

While reporting its Q4 results, the company's management has refrained from giving quantitative revenue guidance, unlike in the prior few years, due to market uncertainty.

"We cut FY25E/26E EPS by 15.3%/11.8%, factoring in the Q4 miss, slower revenue and weak margin trajectory. We do not incorporate the Cigniti acquisition in our estimate, awaiting more clarity. Given the soft margin trajectory, potential equity dilution, and merger-related risks, we cut target PER to 28x (from 30x). Despite the 10%/22% correction in stock price in the last 1M/3M, we believe valuation is rich as the earnings cut remains rather severe; retain REDUCE; cut TP to Rs5,200 at 28x Mar-26E EPS," Emkay Global said.

In the March quarter, Coforge reported organic revenue growth of 1.9% quarter-on-quarter (QoQ) CC driven by BFS vertical. Its TCV came in strong at $774 million (+118.6% QoQ, +157% YoY).

The company's management expects strong growth in FY25 based on a strong 12-month executable order book at $1019 million (+4.6% QoQ, 17.3% YoY), without giving explicit quantitative growth guidance. EBITDA margin expanded 70bp QoQ to 18% in Q4, driven by improvement in utilisation and ramp-up in offshore revenue.

"We expect Coforge to continue to outperform peers, organically. While Cigniti does fill the white spaces management talked about and is also EPS accretive, we would have preferred a company with capabilities in the new-age tech domain. We have not incorporated the Cigniti acquisition into our estimates yet, awaiting key milestones in the merger process – but have prepared pro forma financials (details inside) for the merged entity," Nuvama said.

The brokerage has maintained a buy call but with a reduced target price of Rs 5,850.

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