Buy Coforge: target of Rs 2290: ICICI Securities

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Coforge's management has guided for robust performance, with record deal TCV of USD 1bn in Q2FY27, and hopes to extend this run-rate into Q3, providing visibility for strong near-term revenue growth.
  • The company has upgraded its FY27 consolidated EBIT margin guidance to 16%, driven by AI-led efficiencies and disciplined execution, with a 17% exit-margin expectation in Q4FY27 and beyond.
  • Improving cash conversion, with FCF/PAT guidance of 100% for FY27, and a steady-state tax rate of 23-24%, are also key drivers.
  • The acquisition of Encora is playing out on expected lines, with revenue synergies and margin expansion ahead of expectations.

Thesis Validation Checklist

  • Investors should watch for the company's ability to maintain its robust deal TCV run-rate, and its progress in improving cash conversion and EBIT margin expansion.
  • The company's ability to successfully integrate Encora and achieve revenue synergies will also be key to validating the thesis.
  • Additionally, investors should monitor the company's utilization rates, and its ability to improve gross margin, as these will be important indicators of the company's ability to drive growth and profitability.