Buy Coforge; target of Rs 2500: Motilal Oswal

Buy

Motilal Oswal's research report on Coforge

Coforge announced the acquisition of Encora, a US-based engineering and AI-led services firm with revenue of ~USD500m, adding ~26% to Coforge’s FY26E revenue base. Encora has ~9,300 employees, implying revenue per employee of ~USD74k vs. ~USD69k for Coforge, and operates at higher margins than Coforge. The vertical mix, primarily HiTech and Healthcare, is a positive, especially given Coforge’s strategic intent to scale these segments. Management has indicated that the transaction could be EPS accretive from day one. While there is limited clarity at this stage on the integration approach, past evidence is supportive: SLK Global was ~9-11% of Coforge revenue at the time of acquisition, while Cigniti was ~16%. That said, earlier acquisitions were largely client-led, whereas this transaction is more capability- and leadership-driven, making talent retention and execution discipline more critical given the larger scale of the deal.

Outlook

We continue to view Coforge as a structurally strong mid-tier player well-placed to benefit from vendor consolidation/cost-takeout deals and digital transformation. We value Coforge at 32x (considering a potential dilution) FY28E EPS with a TP of INR2,500, implying a 49% potential upside. Reiterate BUY.

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Coforge - 29122025 - moti