IGI Logo

We attended Coforge’s analyst meet, where the management outlined its highlevel strategy and aspiration to continue delivering sustainable and accelerated profitable growth. Key takeaways: 1) The management emphasized on execution intensity remaining vital for its growth strategy, which focuses on four key growth areas: i) big bets centered around strengthening core capabilities in AI-led engineering, data, and ServiceNow while deepening its presence in priority geographies (NA West and Midwest, ANZ) and industries (healthcare, public sector); ii) focusing on structuring large contracts with a proactive approach, with 14 large deals in FY25 and target of 20 in FY26 (10 closed in H1); iii) accelerating scale through key account expansion; and iv) pursuing semi-stressed assets for M&As for client, capability, and market access, and where execution rigor can drive turnaround. 2) Its CY26 IT budget is likely to be better. However, clients view their technology budgets as elastic, adjusting investments to align with changing needs. 3) The management believes the focus verticals (BFS, Insurance, TTH, Healthcare, Government outside India) and service offerings would offer enough growth opportunities and does not see any reason to expand presence beyond these for the next 3-5 years. 4) It intends to maintain FCF/PAT at 70% or above on a quarterly basis. 5) It aspires to achieve EBITM of 14% in FY26 and maintain this as the minimum threshold going forward. We have accounted for the effect of the Cigniti merger in our estimates which has led to a ~5% increase in EPS estimates. We roll forward the target EPS to Dec-27E at 32x; retain ADD on Coforge while raising our TP by ~8% to Rs2,000.

Outlined a three-pronged growth strategy for North America Coforge derives ~60% of its revenue from North America and is focused on three key growth engines: 1) Its core verticals BFS and TTH remain strong growth drivers. 2) Untapped opportunities in Healthcare (focusing on payer and med-tech devices, while being opportunistic on providers and life sciences) represent strategic bets with significant potential. 3) Expansion in untapped regions – focusing on Hi-tech and Retail/CPG in the West Coast (~14% of NA revenue; serving 16 F1000 companies), while focusing on manufacturing in the Midwest (~11% of NA revenue; serving 12 F1000 companies).

AI-led transformation across the value chain Coforge has embedded proprietary AI platforms, such as CodeInsightAI (for code reverse engineering), BlueSwan (for orchestration), Forge-X (for rapid transformation), and Quasar AI (multi-framework agents, secure RAG, LLM routing), into its service fabric, thus enabling clients to move from AI pilots to enterprise adoption. By integrating these platforms across the SDLC and operations, Coforge helps clients scale up AI—from pilots to enterprise adoption, driving faster modernization, greater reliability, and AIaugmented productivity. It considers AI as a tailwind for firms that combine domain expertise with AI capability, and any deflationary impact from AI is likely to be offset by the rise of new, high-value emerging opportunities.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354