Motilal Oswal Financial Services has reiterated its BUY recommendation on Coforge with a target price of Rs 1,900, implying an upside potential of nearly 30% from the current market price of Rs 1,465. The brokerage remains optimistic about the IT services company's ability to sustain industry-leading growth despite a challenging global macroeconomic environment. Management has laid out an ambitious roadmap to double revenue to approximately USD 5 billion by FY30, supported by deeper penetration in key verticals, strong large-deal momentum, AI-driven transformation opportunities, and strategic acquisitions. Improved profitability, a stronger margin profile, and disciplined capital allocation further strengthen the long-term investment thesis.

Motilal Oswal Reaffirms Confidence in Coforge’s Growth Story

Buy Rating Maintained With Significant Upside Potential

Motilal Oswal has retained its BUY rating on Coforge, identifying the company as one of its preferred picks within the mid-tier IT services space. The brokerage has assigned a target price of Rs 1,900 based on a valuation of 26 times estimated FY28 earnings per share.

According to the brokerage, Coforge continues to demonstrate superior execution capabilities and remains well-positioned to outperform peers through a combination of organic expansion, strategic acquisitions, and domain-led transformation initiatives.

Roadmap to USD 5 Billion Revenue by FY30

Management Targets Nearly 19% Annual Revenue Growth

During its Analyst Day, Coforge management unveiled an ambitious medium-term growth blueprint aimed at expanding annual revenue from roughly USD 2.5 billion at present to approximately USD 5 billion by FY30.

The strategy implies a revenue compound annual growth rate of nearly 19%, including organic growth of around 15%. Management believes this objective can be achieved through deeper penetration within existing verticals, greater wallet share from large customers, continued success in winning transformational contracts, and selective acquisitions.

Rather than creating entirely new business segments, the company intends to scale its existing strengths across major industries. Banking revenue is projected to approach USD 1 billion, while Travel, Insurance, Healthcare and High-Tech businesses are expected to witness substantial expansion over the coming years.

Large Deals Continue to Strengthen Revenue Visibility

Order Book Expansion Provides Strong Growth Foundation

One of the most encouraging indicators highlighted by management was the consistent increase in large deal wins.

The number of large contracts secured by Coforge rose to 21 in FY26 from just 11 in FY22. Meanwhile, the company's executable order book for the next 12 months expanded to nearly USD 1.75 billion compared with approximately USD 720 million four years earlier.

Management also emphasized that order intake has nearly doubled during the same period, reflecting growing customer confidence and increasing demand for the company's specialized technology capabilities.

Margin Expansion Appears Structural Rather Than Temporary

Profitability Profile Enters a New Phase

A key highlight of the analyst interaction was management's assertion that recent margin gains represent a structural transformation rather than a temporary improvement.

FY26 EBITDA margin expanded by 430 basis points year-on-year to 18.6%, while EBIT margin improved by 370 basis points to 14.4%.

Management described the current profitability levels as the company's "new normal." Looking ahead, consolidated EBITDA margin is expected to reach approximately 20.5% in FY27, while consolidated EBIT margin is projected at around 15.5%.

Several strategic actions have contributed to this improvement, including portfolio rationalization, productivity enhancements, AI-driven efficiencies, integration benefits from acquisitions, and the exit from lower-margin business segments.

Artificial Intelligence Emerging as a Powerful Growth Catalyst

Domain Expertise Combined With AI Creates Competitive Advantage

Coforge's AI strategy increasingly revolves around industry-specific solutions rather than generic automation offerings.

The company has developed specialized AI assets for Banking, Insurance, and Travel sectors, focusing on areas such as underwriting, claims processing, wealth management, modernization programs, and customer experience enhancement.

Management highlighted proprietary knowledge platforms such as Lexicon for Banking and Nexa for Insurance, which improve contextual understanding and support sophisticated AI-driven workflows.

Travel remains one of the company's strongest verticals, supported by relationships with more than 60 airlines and extensive passenger service system migration experience. AI-enabled traveler experiences and modernization initiatives are expected to drive future opportunities within this segment.

Commercial Models Evolving Beyond Traditional Billing Structures

Outcome-Based Contracts Gain Momentum

Management indicated that technology transformation discussions increasingly involve business leaders rather than solely chief information officers.

As a result, commercial models are shifting from conventional effort-based billing structures toward outcome-linked engagements, including gain-sharing and revenue-sharing arrangements.

This evolution allows Coforge to leverage its deep industry expertise and participate in higher-value conversations directly linked to business performance indicators.

The trend is already visible in deal metrics. Large-deal total contract value increased approximately 38% year-over-year to USD 629 million in FY26, while win rates improved to 47% from 38%.

Acquisition Strategy Remains a Key Growth Lever

Encora Integration and Debt Management in Focus

Following the acquisition of Encora, Coforge plans to repay approximately USD 550 million in debt over the next three years. The debt carries a fixed interest rate of around 4.6%.

Despite the repayment commitment, management remains focused on investing in client relationships, strategic partnerships, and selective acquisitions.

Past acquisitions such as Incessant, Whishworks, SLK, and Cigniti have delivered meaningful benefits in terms of revenue growth, geographical diversification, customer expansion, and margin enhancement, reinforcing management's confidence in acquisition-led value creation.

Financial Outlook Remains Robust

Strong Earnings Growth Expected Through FY28

Motilal Oswal forecasts continued earnings acceleration over the next two fiscal years.

The brokerage expects earnings growth to remain above 20% annually, supported by strong revenue expansion and sustained margin improvements.

Investment Levels and Target for Investors

Current Price: Rs 1,465

Target Price: Rs 1,900

Potential Upside: 30%

Recommendation: BUY

Investors should closely monitor large-deal conversion rates, Encora integration progress, AI monetization initiatives, and margin sustainability. While macroeconomic uncertainties remain a factor for the global technology sector, Coforge's strong execution record, expanding order book, industry-focused AI capabilities, and improving profitability profile position the company favorably for long-term wealth creation.

Motilal Oswal continues to view Coforge as a structurally strong growth company capable of delivering superior earnings growth and shareholder returns over the medium term.