BackCoforge stock gains 5% on robust Q1 earnings and record deal wins
Coforge's management raised its FY22 organic revenue growth guidance to at least 19% year-on-year and said it does not see any headwind to growth and that the guidance is conservative
PremiumMidcap IT services provider Coforge Ltd reported robust earnings in the June quarter. Its sequential organic revenue growth of 7% in constant currency terms exceeded analysts' expectations. Growth was driven by deal ramp-ups in the Americas. Order intake remaine strong at $318 million, which is the highest ever. This includes three large deals, with one $105 million deal win.
Reacting to the earnings, shares of Coforge rose around 5% on the NSE on Thursday to hit a new 52-week high of ₹5007.
Further, the company's management raised its FY22 organic revenue growth guidance to at least 19% year-on-year, which is 200 basis points higher than Q4FY21. The management further mentioned it does not see any headwind to growth and that the guidance is conservative. According to analysts, strong demand tailwind and record-high deal wins, and a healthy pipeline, should keep Coforge in good stead in FY23 as well.
On the flipside, its operating margins contracted on a sequential basis impacted by annual wage hikes which were rolled out across the organization worldwide with effect from 1 April. Higher visa costs and impact of transition in some of the material deals signed over the last six months, the management said.
Also, akin to peers, the company saw an increase in attrition, which increased by more than 200 basis points to 12.6% for the quarter.
Meanwhile, in the last one year, the stock has rallied by around 150% and trades at a one-year forward price to earnings ratio of 30 times. Analysts say, the sharp upmove in the stock and rich valuations, factor in strong earnings growth.
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