Buy TCS, target of Rs 684: Motilal Oswal

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Motilal Oswal has maintained its buy rating on Tata Consultancy Services (TCS) with a target price of Rs 684 in its October 20, 2009 report. At 3:14 pm, the share was quoting at Rs 640.30, up Rs 12.80, or 2.04%.

"We have upgraded our FY10 EPS estimates by 3.8% to Rs 32.9 v/s Rs 31.7 earlier and by 4.7% in FY11 to an EPS of Rs 36 against Rs34.4 earlier due to [1] better-than-expected volume growth and higher growth visibility, [2] better-than-expected margin progression and operational improvement, [3] higher-than-expected PAT in 2QFY10, [4] lower taxation at 15% in FY10 against an earlier estimate of 17% for 2HFY10. We have reset our exchange rate assumptions from Rs 48/USD for 2HFY10 to Rs 47/USD, while keeping FY11 assumptions intact at Rs47/USD. Our revised FY11 EPS stands at Rs 36 (v/s Rs 34.4 earlier). The stock trades at a P/E of 18.9x FY10E and 17.2x FY11E earnings, a discount of 15% to Infosys. We reiterate TCS as our top pick in large-cap IT stocks. We maintain 'Buy' raising our target price to Rs 684 based on 19x FY11E)," says Motilal Oswal's research report.

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