ICICI Securities Recommends Buying Coforge Stock, Targets Price of Rs 1660

Coforge's FY27 Organic Revenue Growth Faces Headwinds

Coforge's organic revenue growth for the fiscal year 2027 (FY27) is likely to be impacted by the exit of its low-margin India portfolio and a weak exit runrate in its largest vertical, Banking, Financial Services, and Insurance (BFS). Despite this, the company has a healthy next-12-month orderbook, which has seen a 16% year-over-year (YoY) increase. The agreements with UK public sector clients not yet included in the order book could lead to a healthy revenue recovery from the second quarter of FY27.

Guidance and Margin Improvements

Coforge has provided strong guidance for FY27, including an EBITDA margin of 20.5%-21% and an EBIT margin of 15.5% (16.5%-17% organic). This implies a healthy margin improvement of approximately 110 basis points (bps) YoY. However, our research team has cut the organic revenue growth estimate for FY27 to 9.3% (earlier ~12.6%) and increased the EBIT margin estimate for FY27 and FY28 to 15.5% (earlier ~13.6%). This has led to a 10%/12% increase in earnings per share (EPS).

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Outlook and Valuation

We maintain our BUY recommendation on Coforge due to its attractive valuations. We value the company at 25x on FY28E EPS of ~INR 66, leading to a revised target price (TP) of INR 1,660. An increase in the valuation multiple going forward is contingent on an improvement in the company's organic growth trajectory.