Buy Coforge; target of Rs 2370: Motilal Oswal

What happened

Motilal Oswal reported Coforge's 2QFY27 organic revenue growth of 3.8% quarter on quarter in constant currency, above its 3.5% estimate. Order intake was USD1,040m, up 102.3% year on year, with eight large deal wins. The broker reiterated BUY with a target of Rs 2370.

Confirmed

Global impact / market context

A target of Rs 2370 implies 25% potential upside, so the broker sees the shares as undervalued. Doubling order intake gives more visibility into future revenue, which supports the higher valuation multiple of 32 times estimated earnings per share, meaning profit attributable to each share.

Analyst inference

The report raises its target multiple from 29 times to 32 times estimated earnings per share, citing strong deal wins and structurally higher margins, which means profit per sale is expected to stay elevated. That suggests the broker expects investors to pay more for each rupee of Coforge's future profit.

Analyst inference

What to watch

1. Coforge reported an order intake of USD1,040m, up 102.3% year on year, with eight large deal wins. Watch whether these deals convert into revenue later, when the broker expects revenue growth of 51.5% year on year in INR terms. Confirmed
2. Motilal Oswal proposed valuing Coforge at 32 times estimated earnings per share, up from 29 times, and set a target of Rs 2370. Track whether the broker keeps this multiple if deal wins slow. Proposed
3. The higher multiple rests on improved visibility from deal wins and structurally higher margins, with consolidated EBIT margin at 16%. If margins slip below that level, the valuation case weakens and the target price could be cut. Analyst inference

Evidence

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