Coforge shares shed multibagger tag in two years; what should investors do?

Shares of Coforge Ltd (formerly NIIT Technologies) have lost multibagger tag in a span of two years. The IT stock has delivered flat returns during the period. However, Coforge stock delivered multibagger returns of 138% and 324% in three and five years, respectively. The stock rose from Rs 2,205 on October 30, 2020 to Rs 5,042 on BSE in the current session. Similarly, the IT stock climbed from Rs 1227.15 on October 31, 2018 to the current levels.  

The IT stock has gained 31.55% in one year and risen 27.24% since the beginning of this year. Coforge stock touched an intraday high of Rs 5093.20 on Thursday against the previous close of Rs 5025.20 on BSE.  

Coforge stock has a PE of 44.64 and is overvalued with the sectoral PE of 30.02.   Coforge shares have a beta of 1.1, indicating high volatility in a year.    

In terms of technicals, the relative strength index (RSI) of the stock stands at 45.3, signaling it's trading neither in the overbought or oversold zone. Coforge stock trades higher than the 5-day, 10 day, 100 day, 150 day , 200 day but lower than the 20-day, 30 day and 50-day moving averages.   

The stock has turned ex-dividend today. The board of the IT firm announced an interim dividend of Rs 19 during Q2 earnings which were declared on October 19. The IT firm’s consolidated net profit fell 10% to Rs 181 crore for the September 2023 quarter against a net profit of Rs 201 crore in the second quarter of FY23. Gross revenue climbed 16% to Rs 2,276 crore in the quarter under review from Rs 1,959 crore in the year-ago period.  Earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at Rs 263.7 crore, with the operating margin at 11.6%. 

The stock hit a 52-week low of Rs 3565.20 on March 29, 2023 and a 52 week high of Rs 5760 on September 6, 2023.     

Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher said, "The stock after a decent correction has shown signs of bottoming out near the low made at  Rs 4760 zone acting as the support and with a pullback visible has improve the bias to some extent. Further, a decisive move past Rs 5240 levels shall improve and strengthen the trend further to establish conviction for further rise in the coming days with targets visible at Rs 5630 for the short-term time frame."

Choice Broking has upgraded its rating to ‘Add’ post Q2 results.  

“We have introduced FY26E and expect a revenue/EBIT/PAT CAGR of 16.3%/17.6%/21.3%, respectively over FY23-FY26E. We upgrade our rating to ADD and arrive at a revised target price of Rs 5,595 implying a P/E of 30 times (unchanged) on Sept FY26E earnings per share of Rs 186,” said the brokerage.  

Citi maintained 'a' sell' call on Coforge and reduced its target price to Rs 4,215 from Rs 4,360. 

Nomura maintained its 'buy' stance but trimmed target price to Rs 6,310 from Rs 6,480 apiece. 

Gaurav Bissa, VP, InCred Equities said, “Midcap IT stocks have been clear outperformers in the last few months. Coforge is one of the midcap IT stocks to witness a strong upside since April 2023. The stock has been in a consistent formation of higher highs and higher lows implying the trend remains positive. The stock witnessed a recent correction on account of bearish harmonic pattern triggered around Rs 5700 levels. Since then, the stock has corrected to 50% Fibonacci retracement levels around  Rs 4700 followed by a time correction. The stock is expected to witness a time correction for the time being with a drop towards Rs 4500 remaining a possibility. This will result in a retest of swing breakout making it a lucrative buy."         

Abhijeet from Tips2trades said, “Coforge looks sideways to bearish on the daily charts with strong resistance at Rs 5168. A daily close below the support of Rs 4965 could lead to a target of Rs 4705 in the near term." 

Coforge Limited is an India-based information technology (IT) solution company. It is engaged in the in-application development and maintenance, managed services, cloud computing and business process outsourcing. The Company provides computer programming consultancy and related activities. Its geographical segments include Americas, Europe, Middle East and Africa (EMEA), Asia Pacific (APAC), and India.   

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.  

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