Coforge gains 2%, hits record high on Rs 19 per share interim dividend

The company has fixed October 11, as the record date to ascertain the eligibility of shareholders for the payment of the second interim dividend.

Shares of Coforge hit a record high of Rs 7,284.35, gaining 2 per cent on the BSE in Monday’s intra-day trade after the company declared a second interim dividend of Rs 19 per equity share for the financial year 2024-25.

The stock surpassed its previous high of Rs 7,245 that it hit on October 3, 2024.

The company has already fixed October 11, 2024 as the record date to ascertain the eligibility of shareholders for payment of the second interim dividend. In May 2024, the company had paid the first interim dividend of Rs 19 per share on shares with a face value of Rs 10 each.

In the past five months, the stock price of Coforge has appreciated by 65 per cent. The stock had hit a 52-week low of Rs 4,291.05 on May 9, 2024.

The robust growth in 12 month executable order book and green shoots in the BFSI segment, along with higher headcount addition provide strong growth visibility for the company. The focus on margin levers such as improving pyramid, higher offshoring and utilisation will drive margin improvement, according to analyst at Centrum Broking.

“We have increased target PE multiple from 24x to 30x to account for improving demand scenario led by green shoots in BFSI segment(around 50 per cent of revenue). Tier 2 IT companies had undergone higher multiple compression vs tier 1 companies in recent downcycle and we expect that for Coforge, with higher and improving growth profile, the valuation multiple should expand with 25-30 per cent premium over top tier 1 IT companies; to approx. 1.75x-2.0x PEG ratio,” the brokerage firm had said in Q1 result update. The stock, however, is trading above the broking firm's target price of Rs 7,140 per share.

The board of directors of Coforge is scheduled to meet on Tuesday, October 22, 2024, to consider and approve the un-audited financial results of the company for the quarter and half year ended September 30, 2024.

Motilal Oswal Financial Services believes the company’s healthy executable order book and a rebound in BFS client spending bode well for its organic business.

Coforge is involved in rendering information technology/ information technology enabled services (IT/ITeS) across various geographies, including the Americas, Europe, Middle East and Africa, India and Asia Pacific. It is engaged in Application Development and Maintenance, Managed Services, Cloud Computing and Business Process Outsourcing for organisations in a number of sectors, inlcluding financial services, insurance, travel, transportation and logistics, manufacturing and distribution and government.

The company had also signed its largest ever deal from one of its top BFS customers, with a total contract value (TCV) of $400 million, in Q4FY24; this has ensured revenue visibility in an environment of revenue slippages seen for the sector.

The executable order book, which reflects the total value of locked orders over the next 12 months, stands at a record $1.02 billion.

The company's management has set its eye on reaching $2 billion revenue milestone over the next few years and has laid a broad framework towards achieving this. It expects four key areas, including scaling up existing key accounts, new and emerging verticals, partner ecosystem-led growth and acquisitions, to help drive the company towards its target.