Coforge, the midcap information technology services company, is back in focus after global brokerage Nomura maintained its Buy rating on the stock. The brokerage has set a target price of Rs 2,000. This translates to an upside potential of around 6% from the current market price.
Let’s take a look at the investment rationale driving the recommendation for Coforge –
Nomura on Coforge: Proactive approach in the market
According to Nomura Coforge’s leadership has been emphasising a more proactive approach in the market. The Chief Executive Officer said the company’s strong momentum comes from “reaching clients with a solution-led mindset to solve real business problems, and proactively stitching deals.”
The CEO also stated that firms like Coforge – those who take initiative have better visibility on growth than the ones that are “order takers” and depend too much on global economic conditions.
The management has made it clear that the company does not plan to expand into new sectors or countries for the next few years. Instead, it wants to deepen its presence in the five verticals it already serves like banking, financial services (BFS), insurance, travel, healthcare, and public services. The company believes staying focused will help maintain consistency and avoid unnecessary diversification.
The leadership has also said it will stop investing further in the data centre business and aims to deliver “70%+ free cash flow/profit after tax (FCF/PAT)” with no one-off items affecting its profit and loss statement.
Nomura on Coforge: Focus on deals and key markets
Nomura’s report highlighted how Coforge is strengthening its large-deal pipeline. According to the brokerage, the company is pushing four core ideas to maintain its growth pace. The management is placing strong emphasis on the ServiceNow practice (an enterprise digital workflow platform), growing deeper in Australia and New Zealand, expanding large client accounts, and using acquisitions mainly for customer access rather than building new capabilities.
One senior leader noted that the company’s industry-specific expertise especially its long experience in the travel segment can be extended across other sectors. The management believes the same framework can be used to grow in healthcare, particularly in the healthcare provider and medical technology (MedTech) industries in North America.
A key structural decision is to keep the sales teams close to customers. As per the brokerage report, “Sales champions are located in client geographies to ensure proximity to the clients resulting in effective sales.”
Nomura on Coforge: Betting big on artificial intelligence and cloud
Nomura’s report also outlined Coforge’s strong investment in artificial intelligence. The company is building AI capabilities under its Quasar platform and ForgeX platform. The Quasar platform is designed to be technology-agnostic, giving clients the flexibility to choose tools and tech stacks. ForgeX helps speed up AI deployment in client organisations.
The management believes AI will add more business than it replaces. As per the report, the company expects the increase in technology adoption to outweigh the cost savings created by automation.
Nomura’s view: A top pick in mid-cap IT
With these drivers in mind, the brokerage has reiterated its Buy rating. As per the brokerage report, “We maintain our Buy rating on Coforge with an unchanged target price of Rs 2,000 (36x first half FY28 forecast earnings per share). Coforge is our top pick in the mid-cap India IT services sector.”