Buy Tata Consultancy Services: Edelweiss Research

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Buy Tata Consultancy Services: Edelweiss Research

Broking house, Edelweiss Research is bullish on Tata Consultancy Services has recommended buy rating on the stock.

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Broking house, Edelweiss Research is bullish on Tata Consultancy Services has recommended buy rating on the stock.

Edelweiss Research report on Tata Consultancy Services:

"Tata Consultancy Services (TCS) announced its Q3FY07 results, which were impressive and in line with our expectations. Revenues were at Rs 48.6 billion, up 8.4% Q-o-Q, and net profit was at Rs 11 billion, up 11.4% Q-o-Q. On Y-o-Y basis, revenue and net profit growth stood at 40.7% and 50.9%, respectively. The company achieved a milestone by crossing USD 1 billion in revenues and USD 250 million in net profits in a quarter. Healthy growth across service lines projects a strong demand scenario and better pricing power. TCS' existing realisations have room for expansion and the company is making the best use of the demand environment."

"TCS' margin expansions yet again in the current quarter re validate our positive stance on the company. With further scope for increased offshore revenue mix as the quarters progress and continued upscale in the possibility of strong volume growth, billing rate hikes, we believe there are a lot of levers still available for the company. In addition, factors such as employee pyramid optimisation, maturing of new services like infrastructure management, and increasing profitability in acquired businesses and large deals will drive margin upwards."

"Based on these arguments, we are reiterating our 'BUY' recommendation on the stock. We recommend buying into the stock with 12-month P/E range expectations of 23x-26x, implying 10-15% returns from the current levels."