Coforge Surge 5% After Robust Q4 Performance, Brokerages Project Up to 47% Upside

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On May 6, 2025, Coforge Ltd., a leading mid-tier IT services company, saw its share price rally by approximately 5% on the Bombay Stock Exchange (BSE) following the announcement of its stellar financial performance for the fourth quarter of fiscal year 2025 (Q4 FY25, January–March 2025). The strong results, characterised by significant revenue growth, robust order inflows, and a healthy outlook for FY26, have fueled investor optimism and prompted leading brokerages to project an upside potential of up to 47%. This article provides an in-depth analysis of Coforge’s Q4 performance, the factors driving the share price surge, brokerage reactions, and the company’s strategic positioning in the competitive IT services landscape.

Coforge’s Q4 FY25 Performance: A Snapshot

Coforge reported a consolidated net profit of Rs 261.2 crore for Q4 FY25, marking a 16.76% year-on-year (YoY) increase from Rs 223.7 crore in Q4 FY24. Revenue from operations soared by 47.1% YoY to Rs 3,409.9 crore, up from Rs 2,318.4 crore in the corresponding quarter of the previous fiscal year. On a sequential basis, profit grew by 21.2%, while revenue increased by 4.65%. In constant currency (CC) terms, revenue rose 3.4% quarter-on-quarter (Qoq), slightly surpassing analyst expectations, driven by strong performance in the banking, financial services, and insurance (BFSI) and travel verticals.

The company’s order intake was a standout, reaching $2.1 billion for the quarter, including five large deals, with a record total contract value (TCV) of $1.56 billion. The 12-month executable order book stood at $1.5 billion, reflecting a robust 47.7% YoY growth, underscoring Coforge’s ability to secure high-value contracts and maintain revenue visibility. Earnings before interest, tax, depreciation, and amortisation (EBITDA) grew 32.7% YoY to $68 million, with the adjusted EBITDA margin improving by 101 basis points Qoq to 18.7%. However, the EBIT margin contracted by 166 basis points YoY to 13.2%, though it improved 123 basis points sequentially.

Coforge also announced shareholder-friendly measures, including a fourth interim dividend of Rs 19 per share, with a record date of May 12, 2025, and a 1:2 stock split, set for June 4, 2025, to enhance liquidity and affordability for retail investors. These moves further bolstered market sentiment.

At 9:20 AM IST on May 6, 2025, Coforge shares were trading at Rs 7,889.00, up 5.24% from the previous close, after touching an intraday high of Rs 7,999.00, reflecting strong buying interest.

Factors Driving the Share Price Rally

Several key factors contributed to the 5% surge in Coforge’s share price:

1. Robust Financial Performance: The 47.1% YoY revenue growth and 16.76% YoY profit increase highlighted Coforge’s ability to deliver industry-leading growth despite macroeconomic uncertainties. The 3.4% Qoq revenue growth in CC terms, slightly above the expected 3.2%, was driven by strong demand in BFSI and travel sectors, which are critical to Coforge’s revenue mix.
2. Record Order Inflows: The $2.1 billion order intake, significantly higher than the eight-quarter average of $451 million, demonstrated Coforge’s competitive edge in securing large deals. A notable deal with Sabre Corporation, contributing to the $1.56 billion TCV, underscored the company’s ability to win cost-saving contracts typically dominated by larger IT players. The 47.7% YoY growth in the 12-month executable order book to $1.5 billion provides strong revenue visibility for FY26.
3. Strategic Acquisitions: The integration of Cigniti Technologies, acquired in Q2 FY25 for $220 million, has enhanced Coforge’s capabilities in retail, hi-tech, and healthcare verticals and expanded its US footprint. The acquisition is expected to contribute 20% to topline growth and drive 150–250 basis points in operating margin expansion by FY27, positioning Coforge to achieve its $2 billion revenue target.
4. Positive Management Outlook: Coforge’s management expressed confidence in achieving organic growth exceeding 15% in FY26, supported by a robust deal pipeline and synergy benefits from Cigniti. CEO Sudhir Singh emphasised the company’s ambition to surpass the $2 billion revenue mark by FY27, with expected EBITDA margin improvements of 140 basis points. This optimism resonated with investors, reinforcing Coforge’s growth narrative.
5. Shareholder-Friendly Initiatives: The announcement of a Rs 19 per share interim dividend and a 1:2 stock split signalled Coforge’s commitment to returning value to shareholders while enhancing stock accessibility. These measures boosted retail investor participation, contributing to the rally.

Brokerage Reactions: Up to 47% Upside Potential

Leading brokerages responded to Coforge’s Q4 performance with upgraded ratings and raised target prices, projecting significant upside potential:

• Motilal Oswal reiterated a “Buy” rating with a target price of Rs 11,000, implying a 47% upside from the current price of Rs 7,889. The brokerage valued Coforge’s organic business at 38x FY27E EPS and Cigniti at 25x FY27E EPS, citing strong revenue momentum, a 66.6% YoY jump in adjusted PAT for Q1 FY26, and consistent deal wins. Motilal Oswal highlighted Coforge’s leadership among Tier-II IT players, particularly in BFSI, and its potential to capitalise on demand recovery.

• Nuvama Institutional Equities: Maintained a “Buy” rating with a target price of Rs 9,400, suggesting a 19% upside. Nuvama emphasised Coforge’s 174% YoY increase in TCV and 48% growth in the 12-month executable order book, forecasting 20% revenue growth in FY26 and a 25 %+ earnings CAGR over FY25–27. The brokerage praised Coforge’s industry-leading 32% CC YoY growth in FY25 (16% organic) and its strong foundation for FY26.

• Nomura: Assigned a “Buy” rating with a target price of Rs 9,730, indicating a 23% upside. Nomura named Coforge its top pick among mid-cap Indian IT services firms, citing its 3.4% Qoq CC revenue growth, which beat expectations, and strong deal momentum. The brokerage expects Coforge to deliver 20%+ revenue growth in FY26, supported by lower ESOP costs and margin expansion.

• Centrum Broking: Maintained a “Buy” rating but revised its target price to Rs 9,331 from Rs 10,540, implying an 18% upside, adjusting the PE multiple from 38x to 35x to account for near-term macro uncertainties. Centrum noted the high repeat business in the $1.5 billion executable order book and improvements in headcount (up 403 employees to 33,497) and attrition (down 100 basis points Qoq to 10.9%).

• Choice Broking: Upheld a “Buy” rating with a target price of Rs 10,765, suggesting a 36% upside, based on a 40x FY27E EPS multiple. The brokerage adopted a conservative view on margin expansion and reduced estimates by 1–3% due to potential near-term sector challenges, but remained optimistic about Coforge’s long-term growth trajectory.

• Jefferies: Maintained a “Buy” rating and raised its target price to Rs 9,000, indicating a 14% upside. Jefferies highlighted Coforge’s strong CC revenue growth and projected a 23% EPS CAGR over FY25–27, driven by robust bookings and execution.

• HSBC: Upheld a “Hold” rating, acknowledging Coforge’s strong FY25 performance but expressing caution due to macro challenges. HSBC noted the company’s healthy order book and growth visibility but refrained from revising its target price upward.

The consensus among analysts is overwhelmingly positive, with 22 of 35 analysts tracked by Bloomberg maintaining a “Buy” rating, five recommending “Hold,” and eight suggesting “Sell.” The average 12-month price target implies a 26% upside, with Motilal Oswal’s Rs 11,000 target being the most bullish.

Coforge’s Strategic Positioning

Coforge’s Q4 performance underscores its strategic positioning as a growth leader in the mid-tier IT services segment. Several factors contribute to its competitive edge:

1. Diversified Revenue Streams: Coforge derives significant revenue from BFSI, travel, and insurance verticals, with growing contributions from retail, hi-tech, and healthcare post-Cigniti acquisition. Its geographic diversification, with a strong presence in the US, Europe, and APAC, mitigates risks from regional slowdowns.
2. Focus on Digital Transformation: Coforge’s expertise in cloud, data, AI, and automation positions it to capitalise on enterprises’ increasing digital transformation budgets. The company’s partnerships with global clients like British Airways, ING Group, and Sabre enhance its reputation as a trusted IT solutions provider.
3. Acquisition Synergies: The Cigniti acquisition has bolstered Coforge’s capabilities in quality engineering and testing, adding new verticals and expanding its US market share. The integration has exceeded expectations, with Cigniti’s margins improving and synergies driving revenue growth.
4. Operational Efficiency: Coforge’s headcount grew to 33,497, with a 100-basis-point reduction in attrition to 10.9% and a 70-basis-point increase in utilisation to 82%, reflecting improved workforce management. These metrics support margin expansion and operational scalability.
5. Robust Deal Pipeline: The $2.1 billion order intake, coupled with a 40% YoY increase in the 12-month executable order book to $1.3 billion, positions Coforge for sustained growth. The company’s ability to secure large deals across North America, the UK, and APAC highlights its global competitiveness.

Comparison with Cummins India’s Recent Performance

While Coforge’s 5% share price rally reflects strong fundamentals and market confidence, it contrasts sharply with Cummins India Ltd.’s recent 5% share price decline, triggered by its parent company’s withdrawal of 2025 guidance due to tariff uncertainties. Unlike Cummins India, which faces challenges from global trade tensions, raw material cost volatility, and supply chain disruptions, Coforge operates in a relatively insulated IT services sector, benefiting from digital transformation demand and stable client spending.

Cummins India’s export-driven model (40% of revenue) and reliance on imported components make it vulnerable to tariff hikes and currency fluctuations, whereas Coforge’s revenue growth is driven by organic expansion and strategic acquisitions, with minimal exposure to trade barriers. Additionally, Coforge’s proactive shareholder measures, such as dividends and stock splits, contrast with Cummins India’s lack of similar initiatives, further boosting investor sentiment.

Challenges and Risks

Despite its strong performance, Coforge faces several challenges:

1. Macroeconomic Headwinds: Potential slowdowns in client spending in the US and Europe, driven by economic uncertainties, could impact deal conversions. Brokerages like Centrum Broking have adjusted their valuations to account for these risks.
2. Margin Pressures: While the adjusted EBITDA margin improved, the EBIT margin’s YoY contraction reflects costs associated with Cigniti integration and ESOP expenses. Sustained margin expansion will depend on optimising offshoring and fixed-price contracts.
3. Competition: Coforge competes with larger IT firms like TCS, Infosys, and mid-tier peers like Persistent Systems. Maintaining its growth edge will require continuous innovation and deal wins.
4. Valuation Concerns: With a TTM P/E ratio of 80.72, significantly above the sector average of 29.72, Coforge’s stock is trading at a premium. Any earnings miss could trigger profit-taking, as noted by technical analysts citing an overbought RSI of 90.8.

Investor Guidance

For investors, Coforge presents a compelling opportunity, but a balanced approach is advisable:

• Short-Term Outlook: The 5% rally and brokerage upgrades suggest continued momentum, particularly if the stock sustains above the Rs 7,999 resistance level. Technical indicators like RSI and MACD remain positive, but the overbought RSI warrants caution. Investors should monitor Q1 FY26 results for sustained deal momentum.

• Long-Term Outlook: Coforge’s strong fundamentals, including a 32.4% earnings growth forecast and a 19.5% revenue growth CAGR over the next three years, make it a solid long-term bet. Its focus on digital transformation, strategic acquisitions, and a robust order book positions it to outperform peers. The projected return on equity (ROE) of 21% by 2028 further enhances its appeal.

• Risk Management: Given the high P/E ratio and macro uncertainties, investors should adopt a buy-on-dips strategy, targeting price corrections near Rs 7,300–7,500. Consulting certified financial advisors is recommended to align investments with risk profiles.

Strategic Path Forward

To sustain its growth trajectory, Coforge should focus on:

1. Deepening Vertical Expertise: Expanding offerings in BFSI, healthcare, and retail through Cigniti’s capabilities and cross-selling opportunities will drive revenue diversification.
2. Enhancing Margin Efficiency: Leveraging offshoring, fixed-price contracts, and lower ESOP costs can support sustained margin expansion, as projected by management.
3. Scaling Global Presence: Strengthening delivery centres in the US and Europe and exploring new markets in APAC and Africa will mitigate regional risks and boost deal inflows.
4. Investing in Innovation: Continued investments in AI, cloud, and automation will ensure Coforge remains competitive in the rapidly evolving IT services landscape.

Conclusion

Coforge’s 5% share price rally on May 6, 2025, reflects its exceptional Q4 FY25 performance, marked by 47.1% YoY revenue growth, a record $2.1 billion order intake, and strategic advancements through the Cigniti acquisition. Brokerages’ bullish outlook, with target prices up to Rs 11,000, underscores Coforge’s position as a growth leader in the mid-tier IT sector, with a potential 47% upside. While challenges like macro headwinds and valuation concerns persist, the company’s robust fundamentals, diversified revenue streams, and proactive shareholder measures make it a compelling investment.

In contrast to Cummins India’s tariff-driven challenges, Coforge’s resilience in a digital-first market highlights its strategic advantage. Investors should stay attuned to upcoming quarterly results, global tech spending trends, and management commentary to navigate short-term volatility while capitalising on Coforge’s long-term growth potential. For the latest updates, follow Business Today, Moneycontrol, and Financial Express.