Hold Tata Consultancy Services; target of Rs 2346: Geojit Financial Services
Geojit Financial Services recommended hold rating on Tata Consultancy Services with a target price of Rs 2346 in its research report dated April 20, 2017.
Geojit Financial Services' research report on Tata Consultancy Services
TCS’ Q4FY17 performance was slightly below our expectations with revenue declining by 0.3% QoQ despite volume growth of 1.7%, clearly indicating pricing pressure in the traditional verticals. Realisation during the quarter fell 0.7% QoQ in CC terms. Revenue was also impacted by adverse cross currency movement (1.3%). While revenue in dollar terms increased 1.5% QoQ, it rose 1% in constant currency.
We have reduced our EBIT margin by 70bps for FY18E/19E to factor in higher investments by the company towards building digital capabilities and higher offshore hiring. As a result, we expect the net profit to grow at a moderate CAGR of 6.5% over FY17-19E. Thus, we have slightly toned down our PAT estimates for FY18E/FY19E by 2.8%/3.7%. Maintain HOLD with a revised TP of Rs 2,346 (earlier Rs 2,436) based on 15.5x FY19E P/E.
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