Buy TCS; target of Rs 1370: Dolat Capital

“Post the earnings we turn incrementally positive on TCS in view of its confident stance on the business outlook and currency & utilization tailwinds which will ensure sustained profitability in FY13. We maintain TCS as our Top Pick among Tier I IT space and expect it maintain its outperformance over peers in the near term (Target price of ‘1370 valued at 18x of its FY14E earnings).”

“TCS’s Q4 FY12 operating results were broadly inline with Revenue/EBIT growth of 0.4%/-5% QoQ as anticipated owing to weaker fx realizations. Revenue grew 2.3% in Constant currency terms, driven by a 3.2% volume growth and realization decline of 97bps. TCS managed broad-based growth across geographies, except for the continental Europe (down 6% QoQ). Vertical wise, company has a mixed performance for the quarter and expects Telecom to do well in FY13. The company has announced average salary hike of 8%/2-4%/6% for its employees in India/Developed/Developing markets. It has over 45,000 fresher offers due in FY13.”

“PAT grew by 1.6% QoQ to ` 29bn ahead of our estimates owing to higher other income (` 2bn gain more than expectations). The company is witnessing higher demand for its service delivery model and better/faster closure versus the previous quarter. Thus; we have turned incrementally positive on TCS in view of its strong business growth outlook based on robust growth expectancy for outsourcing and quicker decision making & rampups among its client portfolio,” says Dolat Capital research report.   

Public holding more than 90% in Indian cos

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