'Buy' Coforge Maintains Motilal Oswal On Sustained Growth Trajectory, Deal Pipeline; Stock Remains Top Pick

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Motilal Oswal Report

We believe Coforge Ltd.’s strong executable order book and resilient client spending across verticals bode well for its organic business. Cross-selling opportunities in Cigniti remain highly synergistic for the company.

We value Coforge at 38x FY27E EPS with a target price of Rs 2,240, implying a 29% potential upside. We reiterate our Buy rating on the stock.

Coforge remains one of the fastest-growing companies in the sector and is likely to sustain this trajectory in the medium term. That said, aggressive investments in capacity and acquisitions have meant that free cash flow growth has lagged both mid-cap and large-cap peers.

We analyzed rolling three-year cash conversion metrics across peers and benchmarked them against other high-growth sectors like EMS. Our findings reaffirm that IT services remain the gold standard in cash flow conversion, with most companies consistently delivering strong FCF/PAT ratios. Coforge, admittedly, lags peers.

There are reparations to be made in FCF conversion as the company absorbs past investments and optimizes working capital. However, we believe the foremost driver for re-rating remains earnings growth, and Coforge’s sustained growth trajectory and deal pipeline leave it well positioned.

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