Axis Securities has reiterated a BUY call on Coforge Ltd., setting a revised target price of Rs 1,690, implying a potential upside of approximately 45% from the current market price. In a quarter that underscored both operational resilience and strategic clarity, Coforge delivered a robust performance marked by strong deal wins, expanding margins, and accelerating profitability. The company continues to build momentum heading into FY27, supported by a record order book, successful integration of acquisitions, and a clear pivot toward AI-led transformation. While near-term adjustments—such as exiting low-margin business segments—may temper growth briefly, the broader trajectory remains intact. Axis Securities believes Coforge is entering a structurally stronger phase, backed by visibility, execution strength, and expanding digital capabilities.

Investment Thesis: Structural Growth Backed by Execution Strength

Coforge’s investment appeal lies in its ability to combine aggressive deal wins with disciplined execution. The company has built a strong pipeline, closing five large deals in Q4FY26 and 21 for the full fiscal year. This has translated into a record 12-month executable order book of $1.75 billion, up 16.4% YoY, offering high revenue visibility.

Beyond volume, the quality of deals—especially long-term contracts and framework agreements—positions the company to sustain growth even amid global macro uncertainties. Axis Securities maintains that this visibility is central to its bullish stance.

Q4FY26 Performance: Margin Expansion Steals the Spotlight

The company delivered a strong earnings beat driven by margin expansion and operational leverage.

Coforge reported revenue of Rs 4,450 Cr in Q4FY26, registering a 30% YoY growth. However, the real highlight was profitability. EBIT surged 73.5% YoY to Rs 697 Cr, while EBIT margins expanded sharply to 15.7%.

Net profit stood at Rs 666 Cr, rising an impressive 118% YoY, aided by a one-time tax adjustment linked to the Cigniti merger.

This performance reflects improved cost efficiencies, favorable currency movements, and disciplined expense management.

Order Book Strength: Visibility at Record Highs

The order pipeline remains one of Coforge’s strongest growth anchors.

Q4FY26 order intake stood at $648 million
Total large deals in FY26 reached 21
Executable order book touched $1.75 billion

Additionally, the company secured a $150 million five-year contract in the UK public sector, which is yet to fully reflect in revenue forecasts.

This robust pipeline ensures sustained growth momentum into FY27 and beyond.

Strategic Moves: Acquisitions and Business Optimization

Coforge is actively reshaping its portfolio to enhance profitability and scalability.

Encora acquisition (funded via $550 million loan) is now integrated and expected to drive growth from Q1FY27
Cigniti Technologies merger has been completed, strengthening capabilities
Exit from low-margin India business (~$40–45 million annually) to improve margins

While this exit may result in a short-term revenue dip of $15–20 million, it is strategically aligned with long-term profitability.

AI-Led Transformation: Building Future Moats

The company is aggressively positioning itself in the AI services ecosystem.

Coforge is leveraging six strategic pillars:

Deep domain expertise
Strong client relationships
Hybrid delivery model (“ModSquads”)
Scalable OneAI platform
Agile execution capabilities
AI-trained workforce of 30,000+ professionals

This positions Coforge as a serious contender in next-generation IT services, particularly in AI-led transformation deals.

Segmental Performance: High-Growth Verticals Lead

Growth remains diversified, with standout performance across key verticals.

Healthcare and High-Tech grew 98% YoY
Travel segment expanded 62% YoY
Emerging verticals (Retail & Manufacturing) grew 27% YoY
Banking lagged at 12% but is expected to recover in FY27

This diversified growth profile reduces dependency risks and enhances stability.

FY27 Outlook: Strong Guidance Signals Confidence

Management remains confident about sustaining growth momentum in FY27.

EBITDA margin guidance: 20.5%–21%
EBIT margin: ~15.5% (consolidated)
Free cash flow conversion upgraded to 100%+ of PAT

Revenue growth will be driven by:

Strong deal pipeline
Increased adoption of digital and AI services
Improved client spending trends

Valuation Framework: Attractive Risk-Reward

Axis Securities values Coforge at 26x FY28E EPS.

The valuation appears compelling given the company’s growth trajectory, margin expansion, and strong execution track record.

Financial Trajectory: Sustained Earnings Growth

Coforge is expected to deliver consistent double-digit growth across key financial metrics.

Revenue projected to grow from Rs 16,403 Cr in FY26 to Rs 22,409 Cr by FY28
Net profit expected to rise to Rs 2,378 Cr by FY28
ROE maintained above 21%

This reflects a structurally improving earnings profile supported by operational leverage.

Key Risks to Monitor

Despite strong fundamentals, certain risks remain:

Global recession impacting IT spending
Currency volatility affecting margins
Rising subcontracting costs
Execution risks in large deal ramp-ups

Final Word: A High-Conviction Growth Play

Coforge stands at the intersection of strong execution, strategic clarity, and emerging technology leadership. With a record order book, improving margins, and a focused AI strategy, the company is well-positioned to deliver sustained earnings growth over the medium term.

Axis Securities’ BUY recommendation reflects confidence in Coforge’s ability to navigate near-term challenges while capitalizing on long-term digital transformation opportunities. At current levels, the stock offers an attractive entry point for investors seeking exposure to a high-growth IT services player with strong visibility and improving profitability.