Buy Coforge; target of Rs 2300: Prabhudas Lilladher

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Deal wins momentum: Coforge reported a record eight large deal wins in Q2, with a total value of USD 1.04 billion, up 50.5% QoQ, and an executable order book of USD 2.38 billion, up 45% YoY.
  • Margin expansion: Management raised FY27 EBIT margin guidance to 16% from 15.5%, with a target of 17% in Q4, driven by AI-led productivity, G&A efficiencies, and operating leverage.
  • Organic growth: Coforge's organic growth was 3.8% QoQ CC, with broad-based geographic growth, led by the Americas, up 13.9% QoQ.
  • Encora integration: The integration of Encora is progressing well, with cost synergies ahead of plan and revenue growth expected to mirror Coforge's from Q3 onwards.

Thesis Validation Checklist

  • Deal wins: Monitor the number and value of large deal wins in the next few quarters to assess the sustainability of Coforge's growth momentum.
  • Margin expansion: Track the company's progress in achieving its EBIT margin guidance, driven by AI-led productivity and operating leverage.
  • Organic growth: Watch for continued broad-based geographic growth, particularly in the Americas, and monitor the company's ability to maintain its organic growth momentum.
  • Encora integration: Assess the progress of the Encora integration, including revenue growth and cost synergies, to evaluate the success of the acquisition.