Buy Coforge Ltd For Target Rs. 1,930 By Choice Broking Ltd
Core strengths fueling COFORGE’s sustained success
COFORGE’s execution intensity is led by weekly large-deal proposals and disciplined pursuit of key bets; (1) Hyper-Specialization in industries like Travel, Financial Services, & Healthcare, (2) Enabling differentiation through deep domain expertise, and (3) Deep Engineering Capabilities, led by AI-driven development & platforms like Forge-X. It supports software acceleration & legacy modernization making engineering excellence as strategic foundation for growth. Given these factors, we expect Revenue/ EBITDA/ PAT to grow at a CAGR of 19.5%/ 24.8%/ 34.7% over FY25–FY28E. Following the exit of Advantage-Go business, we have revised our estimates. Rolling forward to FY28 estimates & taking average FY27E & FY28E EPS of INR 55.1, we have revised our PE multiple to 35x (earlier 40x) to arrive at a revised Target Price of INR 1,930 & have maintained our rating to BUY.
Revenue acceleration continues; exit from Advantage Go impacts PAT
* Reported Revenue for Q1FY26 stood at USD 442.4Mn up 9.6% QoQ (vs CIE est. at USD 431.0Mn). In INR terms, revenue stood at INR 36.9Bn, up 8.2% QoQ.
* EBIT (including other income) for Q1FY26 came at INR 4.9Bn, up 8% QoQ. EBIT margin was down 5bps QoQ to 13.2% (vs CIE est. at 12.5%).
* PAT of the continuing operations (excluding Advantage Go) for Q1FY26 came at INR 2.5Bn, down 4.8% QoQ (vs CIE est. at INR 2.7Bn).
COFORGE aspires for strong FY26 with stellar order book of USD 1.55Bn:
COFORGE aspires for strong FY26 with stellar order book of USD 1.55Bn: Coforge delivered a strong Q1FY26 performance with robust deal wins and a positive revenue outlook. The company secured 5 large deals, contributing to a record order intake of USD 507Mn & an executable order book of USD 1.55Bn for the next 12 months—a 46.9% YoY rise. Prioritizing net new revenue in large deals, Coforge achieved 9.6% sequential USD revenue growth. We expect this performance lays the foundation for another exceptional fiscal year of robust growth. H2FY26 is projected to outperform H1, driven by revenue realization from recent wins. Amongst verticals, Travel, Transportation & Hospitality led with 32.3% sequential growth, while Insurance grew by 1.1%. Though BFS saw a marginal 1.1% decline, a strong pipeline & ongoing demand for cost efficiency & modernization fuel optimism. Geographically, the Americas remained dominant, contributing 56.7% of revenue & posting solid sequential and YoY growth.
FY26 14% EBITM target remains intact: Coforge reported margin resilience in Q1FY26, with EBITDAM rising 61 bps QoQ to 17.5%, and EBITM at 13.2%. The company remains confident of achieving 14% reported EBIT for FY26, supported by a stronger H2 on the back of large deal ramp-ups. Q1FY26 margins were weighed down by higher amortization from acquisitions, depreciation linked to an AI-powered data center deal, elevated subcontractor & visa expenses, & ramp-up costs of a major contract. However, we expect margin expansion in Q2 & Q3, aided by operational efficiencies & lower ESOP costs, will help offset Q2 wage hikes. On the talent front, Coforge added 1,164 employees in Q1FY26, increasing total headcount to 34,187, contrasting broader industry layoffs.
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