COFORGE - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 3.6
| Stock Code | COFORGE | Market Cap | 55,629 Cr. | Current Price | 1,655 ₹ | High / Low | 1,994 ₹ |
| Stock P/E | 76.5 | Book Value | 179 ₹ | Dividend Yield | 0.92 % | ROCE | 13.9 % |
| ROE | 11.3 % | Face Value | 2.00 ₹ | DMA 50 | 1,730 ₹ | DMA 200 | 1,712 ₹ |
| Chg in FII Hold | 0.44 % | Chg in DII Hold | -1.20 % | PAT Qtr | 133 Cr. | PAT Prev Qtr | 332 Cr. |
| RSI | 42.8 | MACD | -24.6 | Volume | 8,08,269 | Avg Vol 1Wk | 16,80,589 |
| Low price | 1,191 ₹ | High price | 1,994 ₹ | PEG Ratio | -10.4 | Debt to equity | 0.08 |
| 52w Index | 57.8 % | Qtr Profit Var | 25.5 % | EPS | 20.3 ₹ | Industry PE | 23.9 |
📊 Financials: Coforge Ltd. has reported PAT of 133 Cr compared to 332 Cr previously, reflecting a sharp decline in profitability despite a 25.5% quarterly profit variation on a different basis. ROE at 11.3% and ROCE at 13.9% indicate moderate efficiency. Debt-to-equity ratio of 0.08 highlights a low-leverage balance sheet, which is positive. EPS of 20.3 ₹ supports earnings visibility, but profit momentum has weakened significantly.
💹 Valuation: Current P/E of 76.5 is far above the industry average (23.9), suggesting severe overvaluation. P/B ratio ~9.24 (Price 1,655 ₹ / Book Value 179 ₹) is expensive relative to book value. PEG ratio of -10.4 highlights weak growth prospects relative to valuation. Dividend yield of 0.92% provides modest income support. Intrinsic value appears lower than current price, reflecting stretched valuations.
🏢 Business Model: Coforge operates in IT services, focusing on digital transformation, cloud, and AI-driven solutions. Competitive advantage lies in niche verticals such as BFSI, travel, and insurance, along with strong client relationships. However, earnings remain vulnerable to global IT spending cycles and margin pressures.
📈 Entry Zone: Attractive accumulation zone only if price corrects towards 1,350–1,400 ₹, closer to its 52-week low (1,191 ₹). RSI at 42.8 indicates neutral momentum, while MACD (-24.6) suggests bearish undertone. Investors should wait for valuation comfort before entry.
🔒 Holding Guidance: Fundamentally stable with strong business model and niche positioning, but valuations are stretched and profitability has weakened. Suitable for long-term holding only if accumulated at lower levels for margin of safety.
Positive
- Low debt-to-equity ratio (0.08) ensures financial stability.
- Diversified IT services portfolio across BFSI, travel, and insurance.
- FII holdings increased (+0.44%), reflecting foreign confidence.
Limitation
- High P/E (76.5) compared to industry average (23.9).
- P/B ratio of 9.24 indicates expensive valuation.
- PEG ratio of -10.4 highlights weak growth prospects.
- Quarterly PAT decline (133 Cr vs 332 Cr) raises caution.
- DII holdings decreased (-1.20%), showing domestic caution.
Company Negative News
- No major negative news reported, but profit decline and stretched valuations raise caution.
Company Positive News
- Strong client relationships in niche verticals.
- Low leverage enhances financial resilience.
- FII holdings increased, reflecting foreign investor confidence.
Industry
- IT services sector benefits from digital transformation and cloud adoption.
- Industry P/E at 23.9 suggests moderate optimism.
- Global IT spending cycles and margin pressures impact earnings stability.
Conclusion
✅ Coforge Ltd. is financially stable with a strong business model and niche positioning. However, valuations are stretched and profitability has weakened. Long-term investors should accumulate only near 1,350–1,400 ₹ for margin of safety, while monitoring global IT demand and margin trends.
I can also extend this with a peer comparison against Infosys, TCS, and LTIMindtree to highlight Coforge’s relative valuation and efficiency. Would you like me to add that?