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Coforge demonstrated strong operational performance in its March quarter, achieving an EBITDA margin of 20.6%. This represents an expansion of 232 basis points quarter-on-quarter. Revenue from operations increased by 5.2% sequentially to ₹4,450 crore. Year-on-year, revenue climbed 30% in rupee terms. The company's stock closed Tuesday at ₹1,168.00, with trading volume around 2.3 million shares.
This strong operational backdrop contrasts with the company's valuation. Coforge's trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio stands at approximately 47.98. This is a significant premium compared to the Nifty IT index's P/E of 19.94. Large-cap IT peers like Tata Consultancy Services (TCS), Infosys, and HCL Technologies trade at considerably lower P/E ratios of 16.83, 15.90, and 18.65, respectively.
The company's reported consolidated net profit for the March quarter was ₹612 crore, a substantial jump from ₹250 crore in the preceding quarter. However, this headline figure was significantly boosted by a one-off reversal of a deferred tax liability related to the Cigniti merger, which added approximately $20.3 million to the results. Excluding this non-recurring item, the company's normalized profit for the quarter was $47 million.
This elevated valuation comes despite the stock's performance over the past year, which has seen a decline of 23.19%, a steeper fall than the Nifty IT index's 19% drop during the same period. Concerns are being raised about the sustainability of earnings growth and the reliance on one-off benefits to inflate reported profits, given the high P/E multiple. The stock's recent underperformance suggests the market may be reassessing Coforge's growth prospects and valuation, particularly after past reactions to earnings misses, such as a nearly 5% stock drop following a Q1 FY25 profit miss and margin contraction.
Looking ahead, Coforge management expressed confidence for fiscal year 2027, projecting robust revenue growth and an EBITDA margin expected to exceed 20.5%. The company's executable order book stands at $1.75 billion, marking a 16.4% increase year-on-year.
Analysts maintain a consensus 'Buy' rating for Coforge, with an average 12-month price target of ₹1,165. This target suggests limited immediate upside from current trading levels. The broader Indian IT sector is anticipating a recovery in 2026, with IT services spending projected to grow by 11.1%, largely driven by AI services.