Axis Direct's research report on TCS
TCS reported lower revenue in Q2FY17 largely due to BFSI softness, unexpected decline in Retail/ CPG and delay in India orders worth Rs 1.8 bn (60 bps impact to INR revenue). However, there has been no project cancellation. EBIT margin was better than expected due to operating efficiencies. Digital revenue (16.1%) continues to grow strongly (30% YoY). Q2FY17 was marked by continuation of strong deal wins (9 large deals) and maintained client mining momentum (USD 50 mn/ USD 20 mn+ revenue band increased by 1/6 QoQ).
Lower Q2FY17 revenue lead us to reduce our FY17/18E USD revenue growth by 1% each to 7/ 10% and our EPS to Rs 132/Rs 142. Given 2% downside from CMP of Rs 2,329, we maintain HOLD with TP of Rs 2,275 (16x FY18E EPS). The stock trades at 17.6x FY17E and 16.4x FY18E EPS. For all recommendations, click here
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