Coforge shares are poised for significant growth, with Nuvama Institutional Equities forecasting a 51% upside. The brokerage firm has reiterated a 'BUY' rating for the IT major, setting a target price of Rs 2,200 per share, based on a valuation of 32 times its FY28E PE. Currently, Coforge shares are trading around Rs 1460, reflecting a market capitalization of Rs 62,822 crore.
This positive outlook for Coforge shares is largely attributed to the company's robust financial performance in the fourth quarter and its strategic advancements. Coforge reported exceptional Q4 earnings, with net profit soaring 145% year-on-year to Rs 612 crore. Revenue also saw a substantial increase, climbing 30% to Rs 4,450 crore. Furthermore, the company's EBITDA margin expanded to 16.6%, surpassing the Street's estimate of 14.6%.
Strategic Focus on AI and Ambitious Growth Targets
Nuvama highlights Coforge's industry-leading growth and a renewed emphasis on improving margins and cash flows as key drivers. A significant factor in the brokerage's confidence is Coforge's proactive approach to developing artificial intelligence (AI)-driven solutions. The company is expected to make substantial progress in this area, leveraging AI to boost profitability and operational efficiency.
Investor sentiment has been further bolstered by Coforge's recent investor day guidance. The company aims to achieve a formidable $5 billion revenue target by FY2030. This includes approximately $700 million from inorganic growth, implying a 15% organic and 20% consolidated Compound Annual Growth Rate (CAGR) between FY26 and FY30.
Key Takeaways from Investor Day
- Revenue Targets: Aspirations for over $2.6 billion revenue and more than $400 million EBIT by FY27. For FY30, targets are set at $5 billion revenue and over $800 million EBIT (including acquisitions).
- Order Book Strength: Coforge reported an order book of $1.75 billion, indicating strong future revenue potential. Healthcare and public sector deals are expected to drive large deal momentum in FY27.
- AI Implementation: Over 75% of AI pilots have successfully scaled into production using the 'ModSquad' human agent hybrid model, showcasing effective AI integration.
Management emphasized that margin expansion is a structural change, fueled by AI-led cost efficiencies and a deliberate strategy to exit lower-margin business segments. These factors collectively position Coforge for sustained financial performance and a significant upside in its share value, according to Nuvama.