Motilal Oswal Financial Services has issued a BUY recommendation for Coforge Limited, setting an ambitious target price of Rs 2,240, representing a substantial 29% upside from its current market price of Rs 1,739. The research house's comprehensive analysis underscores Coforge's strategic positioning in the journey toward achieving USD 5 billion in revenue. Despite facing headwinds in cash flow conversion compared to industry peers, the company demonstrates resilient growth momentum through large deal acquisitions, cross-selling synergies from the Cigniti acquisition, and robust client spending across diversified verticals. Management maintains confidence in sustaining long-term growth trajectories while targeting improved operational metrics for FY26.

Research House Endorsement and Investment Thesis

Motilal Oswal Financial Services has reaffirmed its BUY rating on Coforge Limited, establishing a target price of Rs 2,240 against the current market price of Rs 1,739. This recommendation emanates from the research house's conviction regarding Coforge's executable order book strength and resilient client spending patterns across multiple industry verticals.

The investment thesis centers on Coforge's demonstrated capability to navigate the evolving demand landscape while capitalizing on transformation-driven opportunities. The company's valuation methodology employs a 38x FY27E EPS multiple, reflecting premium positioning within the mid-tier IT services segment.

Demand Environment: Selective Recovery Patterns

The contemporary market environment presents a dichotomous landscape where discretionary spending remains constrained, yet substantial opportunities exist for appropriately positioned vendors. Coforge's management articulated that clients with well-defined budgets are prioritizing transformational programs over traditional Time & Material engagements.

Client fatigue has emerged regarding generic solutioning approaches, creating opportunities for vendors capable of delivering outcome-driven solutions. Importantly, clients demonstrate willingness to fund proposals showcasing strong Return on Investment metrics, aligning favorably with Coforge's proactive solutioning methodology.

Global Capability Centers are experiencing implementation delays, partially attributed to anti-offshoring sentiment, though overall IT budget finalization demonstrates enhanced confidence compared to previous fiscal periods.

Strategic Deal Momentum and Market Positioning

Coforge has established an aggressive target of securing at least 20 deals exceeding USD 20 million during FY26, with five transactions already concluded. The company's proactive proposal approach yields an impressive win rate of approximately 40-45%, substantially outperforming Request for Proposal-led engagements.

The landmark Sabre transaction represents more than a singular achievement, functioning as a catalyst for expanded opportunities within the travel vertical. Travel sector contribution has scaled to approximately 23% of total revenue, establishing a differentiated growth engine for the organization.

Management has reaffirmed confidence in sustaining the company's historical eight-year growth CAGR, supported by large deal momentum, sectoral diversification initiatives, and strategic inorganic opportunities.

Financial Performance Metrics and Margin Guidance

Coforge's FY26 EBIT margin guidance stands at approximately 14% on a reported basis, which management considers adequate for fueling sustainable growth trajectories. Recent quarterly margin impacts from one-off items have been addressed, implying normalized operational efficiency moving forward.

Utilization metrics retain improvement potential, with subcontracting serving as a flexibility lever while its proportional share is expected to decline progressively. The company maintains aggressive hiring with a net addition run rate of approximately 1,000 employees per quarter, demonstrating commitment to capacity expansion.

Acquisition Strategy and Cross-Selling Synergies

Cross-selling initiatives from the Cigniti acquisition demonstrate progressive momentum, mirroring the successful integration and scaling achieved with SLK's business post-acquisition. This strategic approach has proven effective despite underlying weakness in SLK's core mortgage business.

Inorganic growth remains a near-term strategic priority, with management expressing openness to acquisitions in targeted capability areas. The objective encompasses adding capability depth while achieving further diversification, leveraging Coforge's demonstrated integration and scaling competencies.

Cash Flow Conversion: Areas for Improvement

While Coforge maintains its position among the sector's fastest-growing companies with sustainable medium-term trajectory prospects, aggressive investments in capacity expansion and acquisitions have resulted in free cash flow growth lagging both mid-cap and large-cap peers.

Motilal Oswal's comprehensive analysis of rolling three-year cash conversion metrics across peer groups, benchmarked against high-growth sectors like Electronics Manufacturing Services, reaffirms IT services as the gold standard for cash flow conversion. However, Coforge admittedly requires reparations in free cash flow conversion metrics.

Investment Recommendation and Price Targets

Current Market Price: Rs 1,739
Target Price: Rs 2,240
Potential Upside: 29%
Investment Rating: BUY

The research house emphasizes that foremost re-rating drivers remain centered on earnings growth trajectories, positioning Coforge favorably through its sustained growth momentum and robust deal pipeline. The company's strong executable order book and resilient client spending across verticals provide foundational support for organic business expansion.