Coforge shares: PL Capital initiates coverage with 32% upside potential

PL Capital initiated coverage on Coforge Ltd with a 'BUY' rating, citing strong growth visibility, a robust deal pipeline and a strengthening client base.

In its initiation note, PL Capital said, "We initiate coverage on Coforge with 'BUY' rating and TP (target price) of Rs 2,140 valuing at 32x FY28E earnings, with potential upside of ~32 per cent." The brokerage highlighted Coforge's positioning in the leader's quadrant, supported by deep domain expertise across key verticals.

PL Capital noted that Coforge posted an organic CAGR of around 14 per cent over FY20–25, led by strong traction in BFSI and TTH, which together account for about 50 per cent of revenues, along with growth in healthcare. The company's executable order book of nearly $1.6 billion provides revenue visibility of close to 80 per cent.

The brokerage also pointed to momentum in deal wins, stating that Coforge secured 10 large deals in the first half of FY26 compared with 14 deals in the full FY25, underscoring confidence in sustained mid-teens organic growth. Growth in the number of mid- and top-tier clients at a CAGR of over 20 per cent in the past five years reflects deeper client mining and scaling initiatives.

According to PL Capital, the strengthening client pyramid has also been aided by Coforge's acquisition strategy, including SLK and Cigniti, with the recent Encora acquisition expected to enhance onboarding potential and scalable accounts.

On margins, the brokerage said operating margin is likely to remain around 14 per cent in the medium term due to higher amortisation and limited near-term growth within Encora before full synergies are realised.

"Alongside, we also assume fresh issue of 9.38 crore shares that need to be allotted to sellers of Encora. Additionally, we are parking the term loan of Encora under near-term obligations before the funding decisions are made," PL Capital further stated.