Shares of Coforge surged close to 4% on May 6 as investors were left buoyed by the company’s strong Q4 earnings performance, especially at a time when large-cap peers failed to cheer the Street.
The mid-cap IT company’s consolidated net profit rose 21.2% on a sequential basis to Rs 261.20 crore in the March quarter, up from the Rs 215.50 crore that it clocked in Q3. It’s worth noting that the previous quarter that is the October-December period is seasonally weak for the IT sector due to higher furloughs on account of holidays.
That said, the company’s revenue also grew nearly 5% sequentially to Rs 3,410 crore, as against Rs 3,258 crore in the last quarter. What’s more surprising is that the company also managed to expand its EBIT margins in the March quarter, which came at 15.5% in Q3 as compared to 11.9% in the previous one.
Coforge notched in record large deal closures in Q4 as it netted five large deals, including the mega $1.56-bn Sabre deal with a 13-year tenure in its kitty. Brokerage firm Nomura noted that Coforge also won some deals Q4 on the back of its Cigniti capabilities. Looking ahead, analysts at Nomura expect expect the Sabre deal to start contributing to Coforge revenues in Q1 FY26 itself.
With that, the company’s total contract value (TCV) of deals signed in the March quarter surged to $1.56-bn. Meanwhile, the executable order book for the upcoming 12 months stood at $1.5-bn, an over 10% spike on quarter.
Analysts at Nuvama Institutional Equities see this as the foundation of a very strong FY26 which reaffirms Coforge’s growth leadership in the sector.
The management of Coforge also rolled out optimistic expectations for the future, noting that despite weakening demand due to the prevailing macroeconomic situation, it remains confident of organic growth being higher in FY26 as compared to FY25 on the basis of its deals and pipeline. The management is also targeting 18% EBITDA margin and 14% EBIT margin by FY27, and expects an improvement in FY26 as well.
Backed by its strong growth outlook, Coforge remains Nomura’s top pick in the mid-cap Indian IT services space.
Nuvama shares a similar view, choosing the stock as its our top pick in the sector, while reiterating its belief in Coforge’s ability to build a strong business franchise over the next few years. “Coforge’s strong deal-wins assure another over 20% revenue growth year in FY26, which, coupled with margin expansion on lower ESOP costs, should yield a strong over 25% earnings CAGR over FY25–27,” Nuvama wrote its note.
Despite naming Coforge as its top mid-cap IT pick and retaining ‘buy’ calls on the stock, both Nomura and Nuvama still trimmed its price target for the stock marginally to Rs 9,730 and 9,400, respectively, to factor in the uncertain macro conditions.
