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There were many positive takeaways from the December quarter earnings of mid-tier IT services provider Coforge Ltd. Shares of the company rose around 8% on the NSE in Friday's opening trade.

A key highlight was that the company's management raised its organic constant currency revenue growth guidance from 22% to 24% for FY22. This was backed by strong deal inflows so far in this financial year and a robust deal pipeline. In Q3 FY22, its revenue in constant currency terms grew 5.2% sequentially.

In a post earnings conference call with analysts, the company's management said that it signed large deals in Q3FY22 with two deals worth more than $10 million. On a year-on-year basis, Coforge's order intake stood at $247million, up around 29% with executable order book over next 12 months at $701million, excluding SLK, the management added. Investors would reckon that in April 2021, Coforge bought 60% stake in SLK Global Solutions Pvt. Ltd.

According to the company, SLK integration has proceeded well and with the appointment of senior management, there would be more scope for cross-selling.

Apart from that, although the company's attrition rose from 15.3% in Q2FY22 to 16.3% in Q3FY22, it continues to be amongst the lowest in the industry, the company said in a press release.

Meanwhile, Coforge's adjusted Ebitda margin for the quarter expanded by 90 basis points sequentially to 19.5%. Ebitda is short for earnings before interest tax depreciation and amortization. One basis point is one hundredeth of a percentage point. The management said, despite a wage hike, margins during the quarter were aided by strong growth across clients and better offshore mix. The management has guided for an adjusted Ebitda growth 44% y-o-y in FY22.

Analysts at Prabhudas Lilladher point out that this implies 4Q2FY22 adjusted Ebitda margin would be 20.8% compared to 19.5% in 3Q22. "We believe there is further scope to improve margins in FY23 as well aided by levers of improving offshore mix, revenue growth leverage and pyramid optimization," said the Prabhudas Lilladher report.

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