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Attrition down further, maintains at least 20% CC growth guidance for FY23 - Coforge Q2


What's Buzzing
Coforge continued to guide for at least 20% CC revenue growth for FY23. The margin guidance band was maintained at 18.5-19% for FY23. Attrition of 16.4% was lowest in the industry.
Context
Revenues grew 6.2% QoQ in CC terms while dollar revenues grew 3.4% QoQ to US$246.9 mn. Rupee revenues were up 7.1% QoQ to Rs 1959 crore. Geography wise, the growth in revenues was led by America region (51% mix), which grew 3.4% QoQ while EMEA region (38% mix) reported growth of 7.9% on a low base (down 4.8% in Q1). Vertical wise, growth was led by BFS, insurance, travel verticals, which grew 11.1%, 3.9%, 2.9% QoQ, respectively, while manufacturing vertical reported a decline of 4.7% QoQ. Reported EBITDA margins were up ~165 bps QoQ while adjusted EBITDA margins (ex-Esop costs) were up 190 bps QoQ, aided by continued offshoring expansion, utilisation uptick, higher contribution from higher margin businesses and operational improvements. LTM attrition continued to be lowest among large peers as it was down 160 bps QoQ to 16.4%. The order book remains robust as TCV for the quarter was at US$304 mn. It added 249 employees during the quarter.
Our Perspective
The company's revenue performance continued to be robust while continued healthy TCV indicates that growth guidance of at least 20% in CC is achievable. The company is aspiring to reach US$2 billion (bn) revenues in the next five years (FY23-28). IT business headcount continues to be healthy while there has been a decline in BPO business headcount for last three to four quarters, which is partly as per plan on the company’s continuous focus on bringing in automation there and partly because of some mortgage exposure impacting volumes. Attrition continued to be the lowest in the industry. All verticals, including travel, are doing well and is expected to keep growth momentum ahead. We remain bullish on the prospects of the company on continued strong growth and attrition discipline. Pricing is also an important lever, which would play out in a gradual nature in our view. We estimate 16.8%, 20.4%, 21.3% revenue, EBITDA, PAT CAGR, respectively, in FY22-25E.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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