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Revenue misses estimates, EBITM beats by 50bps, PAT exceeds expectations

• Revenue for Q4FY25 came at INR 34.1Bn, up 47.1% YoY & 4.5% QoQ (vs consensus est. at INR 35.2Bn).

• EBIT for Q4FY25 came at INR 4.5Bn, up 32.0% YoY & 14.6% QoQ (vs consensus est. at INR 4.4Bn). EBIT margin was down 148bps YoY but up 113bps QoQ to 13.2% (vs consensus est. at 12.7%).

• PAT for Q4FY25 stood at INR 2.9Bn, up 31.9% YoY & 36.9% QoQ (vs consensus est. at INR 2.8Bn).

Coforge nears USD 2Bn goal with record USD 3.5Bn FY25 order intake:

Coforge marked FY25 as milestone year, securing a record USD 3.5Bn in order intake, a 75.1% YoY increase, driven by 14 large deals, 5 in Q4 alone. Notably, USD 2.1Bn was booked in Q4FY25, matching FY24's full-year intake. Coforge anticipates strong FY26 growth, supported by a solid order book and robust deal pipeline. Management expects continued organic growth, with large deals closing soon, maintaining FY25 momentum despite macroeconomic uncertainties. Solid deal wins & an expanding order book reinforce the company to meet its mediumterm revenue goal of USD 2Bn sooner than anticipated. Recent acquisitions, such as Cigniti, enable cross-sell and upsell opportunities, further fueling growth. However, we anticipate delays in deal execution for sectors impacted by US tariffs, such as Retail & Travel. With 18% exposure to Travel, caution is expected due to geopolitical & economic factors, which may potentially affect short to mid-term topline growth. However, as global challenges ease, Coforge is likely to gain momentum in GenAI-led transformation deals, especially in the Travel sector, where it holds a leading market share.

14% EBIT margin target by Q4FY26 amid structural gains & cost optimizations:

FY25 exit EBIT margin stood at 13.2% in Q4, showing a 123bps QoQ expansion. The company is focused on improving margins over the next 2 years, aiming for a 14% EBIT margin by Q4FY26. Key drivers of this growth include structural changes & economies of scale. Additionally, a 100bps reduction in ESOP costs by H2FY26 & sale of Advantage Go business, which had a 50bps margin impact (now complete), will also contribute to EBIT growth. We anticipate a conservative EBIT margin expansion of up to 13.4% in FY26E owing to elevated visa costs, wage hikes seasonality, & market challenges as these factors, especially in H1FY26, could impact topline performance & quarterly margins. Headcount growth for large deal ramp-up started in Q3FY25, with significant additions expected in upcoming quarters. Attrition remains industry-low, with the 12-month rate dropping to 10.9%.

View and Valuation:

Despite current macro headwinds, Coforge expects strong growth across business segments, driven by recent acquisitions & key deal wins. While near-term conditions may mildly impact key sectors, we have marginally reduced our estimates by 1–3% and adopted a conservative view on margin expansion. We project Revenue/ EBIT/ PAT to grow at a CAGR of 22.1%/ 31.0%/ 49.0% over FY25–27E. We maintain our rating to BUY with a downward revised target price of INR10,765, implying a PE multiple of 40x (maintained) based on FY27E EPS of 269.1.

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