Coforge shares surge 5% after targets raised on re-rating hopes

Shares of Coforge Ltd. opened as much as 5% higher on Monday, October 27, after the technology services company reported better-than-expected results across parameters for the September quarter (Q2FY26).

Revenue growth remained strong at 5.9%, while profit rose to ₹376 crore, beating estimates of ₹357 crore, aided by foreign exchange gains. EBIT margins expanded by 80 basis points sequentially to 14%, ahead of expectations of 13.7%.

Coforge reported healthy order wins of $514 million during the quarter, taking its total order book to $1.63 billion.

The company said it expects robust growth in the second half of the fiscal year, noting that the fourth quarter is typically its strongest. Management added that based on the current deal pipeline and visibility, Q4FY26 should also deliver solid performance.

With Q2 EBIT margins at 14%, the company sees a potential pathway to achieve 14% EBIT margin for the full year. However, it said that the focus will remain on driving growth rather than pursuing further margin expansion. Coforge also clarified that it is not committing to margins above 14% at this stage.

Free cash flow conversion stood at 84% in Q2, and the company expects FCF to remain in the range of 70-80% of profit after tax going forward.

Brokerages view

Morgan Stanley reiterated its 'Overweight' rating on the stock and raised its price target to ₹2,030.

The brokerage said Coforge delivered an all-round performance in Q2, easing investor concerns and providing strong visibility for the second half of the year on both growth and margins.

It added that beyond FY26, the company's intent to prioritise revenue growth while maintaining a minimum EBIT margin threshold of 14% is a sound strategy.

"With the Q2 print, Coforge has allayed several investor concerns, and consistent execution across parameters could drive a potential re-rating," Morgan Stanley said.

Nuvama Institutional Equities also maintained a 'Buy' rating and raised its price target to ₹2,250, citing yet another robust quarterly performance.

The brokerage said that along with solid results, management commentary helped dispel concerns related to margins and cash flows, paving the way for a significant re-rating of the stock.

JPMorgan retained its 'Overweight' stance with a target price of ₹2,500, citing that Coforge delivered well on margins and cash flows after the challenges seen in the previous quarter.

The brokerage said margins of 14% beat consensus and JPMorgan's expectations by 30 bps and 50 bps, respectively. Management also indicated an improvement in demand and expects strong second-half growth driven by healthy deal wins and a robust pipeline.

On the other hand, Citi remained cautious, maintaining a 'Sell' rating with a price target of ₹1,530. The brokerage pointed out that while Q2 margins were slightly ahead of expectations, revenue growth in dollar terms was weaker.