COFORGE - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 3.7

📊 Core Financials:

- Quarterly PAT at 332 Cr. vs 151 Cr. shows strong growth (+44.8%).

- EPS of 20.9 ₹ reflects moderate profitability relative to valuation.

- ROCE (13.9%) and ROE (11.3%) are modest, indicating average efficiency.

- Debt-to-equity ratio of 0.08 highlights low leverage.

- Cash flows remain stable, supported by IT services demand and global client base.

💹 Valuation Indicators:

- Current P/E of 88.3 is significantly above industry average (26.4), suggesting severe overvaluation.

- P/B ratio ~ 10.3 (1,845 ₹ / 180 ₹), indicating stretched valuation relative to book value.

- PEG ratio of -12.0 highlights weak growth alignment with valuation.

- Intrinsic value appears lower than current price, limiting margin of safety.

💻 Business Model & Competitive Advantage:

Coforge operates in IT services, focusing on digital transformation, cloud, and AI-driven solutions. Its competitive advantage lies in niche verticals like BFSI, travel, and healthcare, along with strong client relationships. However, profitability metrics are modest compared to peers, and valuations are stretched.

🎯 Entry Zone & Long-Term Guidance:

- Entry zone: 1,550–1,650 ₹ (near DMA 200 and support levels).

- Long-term holding: Suitable for investors seeking exposure to IT services growth, but accumulation should be cautious due to high valuations.

Positive

• Strong quarterly PAT growth (+44.8%)
• Low debt-to-equity ratio (0.08)
• DII holdings increased (+2.55%)
• Strong 52-week performance (+80.3%)
• Technical indicators show neutral-to-positive momentum (RSI 50.0, MACD positive)

Limitation

• Extremely high P/E (88.3) and P/B (~10.3)
• PEG ratio (-12.0) signals poor growth alignment
• Modest ROE (11.3%) and ROCE (13.9%)
• FII holdings decreased (-3.33%)

Company Negative News

• FII holdings reduced significantly (-3.33%)
• Valuations remain stretched compared to industry peers

Company Positive News

• Quarterly PAT surged from 151 Cr. to 332 Cr.
• DII holdings increased (+2.55%)
• Strong 52-week rally (+80.3%)

Industry

• Industry P/E at 26.4 indicates sector is moderately valued
• IT services demand driven by digital transformation, cloud adoption, and AI integration
• Competition from larger IT service providers with stronger profitability metrics

Conclusion

⚖️ Coforge shows strong earnings growth and sector relevance, but valuations are highly stretched with modest efficiency metrics. Best accumulated near 1,550–1,650 ₹ for long-term exposure to IT services, while exercising caution on valuation risks.