Coforge Targeted at Rs 2020 by Equity Research Firm Prabhudas Lilladher

Coforge Sees Revenue Growth Amid Challenging BFS Segment

Coforge's recent performance, as outlined in a research report by Prabhudas Lilladher, has shown a revenue growth rate of 2.0% quarter-over-quarter (QoQ) on a constant currency (CC) basis. This figure is slightly above the analyst's estimates of 1.8% QoQ CC, with the growth primarily driven by non-banking and financial services (BFS) excluding the BFS segment.

The BFS segment has faced challenges due to client-specific issues and the transition of a new senior leader. However, management expects the segment to recover as it progresses through fiscal year 2027, with large deal wins anticipated to contribute to the growth. Notably, Coforge has maintained a strong deal momentum, with 21 large deals in fiscal year 2026 and a healthy order intake of $648 million in the fourth quarter. The company also boasts an executable order book of $1.75 billion, representing a 16.4% year-over-year (YoY) increase.

Coforge's management views artificial intelligence (AI) as a key driver of growth, with opportunities arising from modernization, agentic AI, and high-margin managed services. The successful integration of Encora has strengthened the company's engineering depth and AI-led execution capabilities. Taking into account the earlier Encora consolidation, Prabhudas Lilladher has revised its USD revenue growth estimates to 45.7% for fiscal year 2027E and 14.9% for fiscal year 2028E. The analyst also estimates organic USD revenue growth of approximately 13% and 12% for fiscal year 2027E and 2028E, respectively.

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Outlook and Revised Estimates

The research report has raised the estimated earnings before interest and taxes (EBIT) margin to 15.1% and 15.3% for fiscal year 2027E and 2028E, respectively. This revision has also led to a 6% to 7% increase in estimated earnings per share (EPS) for fiscal year 2027E and 2028E. The revised estimates account for interest costs on the $550 million and equity dilution from Cigniti minority issuance and Encora swap.

Recommendation

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Based on the revised estimates, Prabhudas Lilladher assigns a target price of INR 2,020, corresponding to 28 times the estimated EPS for fiscal year 2028E. The research firm maintains a BUY rating for Coforge.