Moneycontrol
Jul 14, 2017 03:38 PM IST | Source: Moneycontrol.com

Hold Tata Consultancy Services; target of Rs 2315: Edelweiss

Edelweiss' is bullish on Tata Consultancy Services has recommended hold rating on the stock with a target price of Rs 2315 in its research report dated July 13, 2017.

 
 
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Edelweiss' research report on Tata Consultancy Services

Tata Consultancy Services’ (TCS) Q1FY18 revenue, at USD4,591mn, moved up 3.1% QoQ and was bang in line with Street estimate. However, EBIT margin at 23.4% (down 240bps QoQ) came below Street’s 24.2% estimate. Margin miss was on account of currency volatility and wage hike. Key highlights: 1) BFSI and retail deal pipeline is improving, but not enough to call out a turnaround; 2) strong 7.6% QoQ growth in digital (contributes 18.9% of revenues); and 3) although retail grew 2.0% QoQ riding its digital prowess, underlying weakness in large customers persists. We maintain that limited margin levers and weak revenue growth will impinge on TCS’s earnings growth. Maintain ‘HOLD’ with a revised TP of INR2,315 (INR2,395 earlier).


Outlook


We believe TCS is a dividend/buyback play till margins stabilise and negative impact of volatile business/geographies gets assimilated. We maintain ‘HOLD/SP’ with revised TP of INR2,315 (16x FY19E EPS). The stock is currently trading at 16.9x FY19E EPS.

For all recommendations report, click here

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