Coforge (COFORGE IN) – Analyst Meet Update – Scaling the next growth phase in the AI era – BUY

We attended Coforge's Investor Day, where management outlined its roadmap to achieve a USD 5bn revenue target by FY30, including USD 4.3bn of organic revenue, implying a revenue CAGR of ~19% and an organic CAGR of ~15% over FY26–30. The growth strategy is centered on 1) scaling strategic accounts, 2) expanding Healthcare and Public Sector while sustaining BFSI and Travel momentum, 3) deepening AI ecosystem partnerships, and 4) pursuing strategic acquisitions. The company expects AI-led opportunities to more than offset productivity-led cannibalization of legacy services, resulting in a net 25–35% increase in IT outsourcing spend. Management also reiterated confidence in sustaining Q4FY26 EBIT margin of ~16.5%, despite Encora-related amortization headwinds, supported by the exit from low-margin businesses, AI-led delivery efficiencies and G&A optimization. We remain constructive on Coforge's outlook, supported by strong deal momentum (21 large deals in FY26, +50% YoY), order intake (USD 2.3bn) and an executable order book (USD 1.8bn, +16% YoY), while Encora expands its engineering capabilities and U.S. market presence. We also believe acquisitions will remain an important pillar of Coforge's FY30 strategy, with future large-scale M&A potentially funded through a mix of debt and equity, which could result in equity dilution. Factoring in the exit of the India Government business (~USD 50mn revenue impact in FY27E), we revise our CC revenue growth estimates to 43.0%/15.1% for FY27E/FY28E from 45.7%/14.9% earlier. On margins, we raise our EBIT margin estimates to 15.3%/15.4% from 15.1%/15.3%, reflecting management's confidence in sustaining margin performance. We maintain our BUY rating with a target price of INR 2,020, based on 28x FY28E EPS.