This Mid-Sized IT Firm Is Dropping Nearly 9% As Q4 Result Disappoints Brokerages

Coforge’s share price was dropping on Friday after brokerage firms downgraded the stock due to the company’s subdued performance in the quarter ended March 2024.

What Happened: The IT services company recorded a consolidated net profit of ₹229.2 crore for the March FY24 quarter, a decrease of 5.6% compared with the previous quarter.

However, revenue from operations grew by 1.5% sequentially to ₹2,358.5 crore for the quarter. On a year-on-year basis, the company posted a significant jump in profit, reaching ₹223.7 crore compared to ₹115 crore in the same period last year.

The board also announced a fourth interim dividend of ₹19 per equity share for the financial year 2023-24.

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Analysts Turn Sour: Jefferies downgraded the stock to “underperform” and reduced the target price to ₹4,290 per share due to Q4 missing estimates on lower-than-expected margins. InCred also downgraded Coforge to “reduce” and lowered the target price to ₹4,431 per share.

Emkay also maintained its “reduce” rating for the stock cutting the price target to ₹5,200 from ₹6,050. The brokerage said that despite the recent slump in the stock, the valuation is still rich.

Coforge’s acquisition of Cigniti Technologies led to a 6% cut in FY24-26 earnings per share compound annual growth rate estimates, according to InCred, despite adding capabilities, geography and vertical diversification.

The company’s board approved the issuance of a corporate guarantee for up to $312.5 million (₹2,605 crore) for Coforge Pte Ltd, a wholly-owned subsidiary, to secure a facility from the Hongkong and Shanghai Banking Corporation.

Price Action: Coforge’s share price was down 8.66% at ₹4,554.15 in morning trade on Friday.

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