The broking firm InCred Equities has slashed the target price on Coforge by 9% to Rs 6,458 from Rs 5,871, earlier. However, the brokerage house has kept the rating unchanged to “Hold” on Coforge. The brokerage gave the rationale that diluting equity to raise funds could outweigh the company’s gains from acquisitions.
The cut in the target price came after the company’s board of directors approved raising Rs 3,200 crore through qualitative institutional placement as it withdrew an IPO of $750 million from the international market.
“This could limit further stock upside as lower EPS growth implies a lower P/E multiple (even retaining target PE/G) while a cut in the valuation over concerns relating to frequent dilution and acquisition integration could lead to a further downside,” the brokerage said in a research report.
InCred has retained the estimates, it has retained the 13.2% revenue expectations over FY24 to FY26, the 22.6% expectation of operating profit over the aforesaid period, and net profit expectations of 26.9% during the same period.
Further, it said that the company should again think of raising funds. On the risk side, it said that the higher cost of deals could accentuate the earnings pressure.
On March 18, the stock of Coforge fell more than 7% to an intraday low of Rs 5,665.10 compared to its previous close of Rs 6,116.40. The stock has fallen over 9% in the last five days and 1.5% during the past six months.