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Margin-led Beat with Strong Profit Surge and Healthy Order Momentum

COFORGE’s Q4FY26 performance reinforces confidence in its growth and margin trajectory, supported by strong deal momentum, robust client mining and a healthy executable order book. Margin expansion to 16.6% highlights effective cost control and early benefits from AI-led efficiency. While the exit from lowmargin businesses may keep near-term growth (Q1FY27) subdued, it reflects a strategic pivot towards higher-quality, margin-accretive growth. Continued traction in large deals, Encora-led synergies and scaling up AI capabilities provide strong visibility for FY27E, with improving profitability and cash conversion further strengthening the investment case. We believe that the shift towards outcomebased delivery through Agentic AI and “Mod Squads,” alongside strong internal AI adoption, has evolved it into a high-quality, margin-accretive growth story, potentially outperforming peers. We expect Revenue/EBIT/PAT to grow at a CAGR of 21.2%/25.7%/29.9% over FY26–FY29E. We re-iterate a BUY rating with a Target price of 1,900 based on FY28E EPS of INR 67.8.

Healthy Margin Gains Drive Earnings Upside

* Q4FY26 revenue stood at USD 489.1 Mn, up 1.7% QoQ (vs. CIE estimate of USD 494 Mn) and up 2.0% in CC terms. In INR terms, revenue stood at INR 44,504 Mn, up 5.2% QoQ (vs. CIE estimate of INR 45,186 Mn). For the full year, revenue stood at USD 1,870 Mn, up 29.2% YoY. In INR terms, revenue for FY26 came in at INR 164,027 Mn, up 35.9%.

* EBIT margin came in at 16.6% for Q4FY26, up 231 bps QoQ (vs. CIE estimate of 14.4%). For the full year, EBIT margin stood at 14.4%, up 370 bps.

* PAT for the quarter came in at INR 6,123 Mn, up 144.8% QoQ. Reported PAT reflects reversal of deferred tax liability due to Cigniti merger. Normalised PAT will be INR 4,276 Mn (vs. CIE estimate of INR 4,180 Mn). For the full year, PAT came in at INR 15,557 Mn, up 91.6% YoY. EPS for the quarter stood at INR 18.1.

Solid Order Book and Acquisition Synergies to Drive FY27 Growth

Q4FY26 order book stood at USD 648 Mn TCV (+9.3% QoQ), with a 12-month executable order book of USD 1.75 Bn (+1.7% QoQ). COFORGE secured 21 large deals in FY26, including 5 in Q4, with additional signed framework agreements expected to convert into revenues from FY27. Growth was led by Healthcare & Hi-Tech (+15.5% QoQ) and Government (ex-India) (+24.3%), followed by Travel, Transportation and Hospitality (+7.4%) and Insurance (+5%), while BFS remained largely flat (+0.8%) due to a one-off client issue, now addressed. Top accounts continued to outperform, with the top 5 growing 45.8% YoY and top 10 rising 40.4%, reflecting a strong client mining momentum. COFORGE continues to execute well on acquisitions, with Cigniti scaling up to ~USD 75 Mn in revenue over two years, while Encora integration is expected to drive growth in FY27. The management is exiting a low-margin India business to prioritise higher-quality growth, which may result in a flattish Q1FY27.

Margin Upside Continues; FY27 Guidance Step-up

COFORGE reported a record Q4 EBIT margin of 16.6% (+430 bps YoY), driven by SG&A leverage (+100 bps), FX gains (+80 bps), lower third-party cost (+50 bps), reduced marketing (+40 bps), and ESOP cost (+20 bps), partly offset by a 60-bps hit from provisions. FY27 margin is anticipated to be supported by structural levers including AI-led automation, Encora-driven G&A synergies (20– 25%), and portfolio rationalisation. The management has guided for consolidated EBITDA margin of 20.5–21.0% and EBIT margin of ~15.5%.

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