Buy TCS, target of Rs 708: Angel Broking

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Angel Broking has recommended a buy rating on Tata Consultancy Services  (TCS) with a price target of Rs 708 in its report dated October 17, 2009. The share closed at Rs 633.45, up Rs 12.05, or 1.94%.

"During 2QFY2010, TCS recorded a Top-line growth of 3.2% qoq, mainly attributable to a 5% qoq growth in volumes and a 0.9% qoq growth due to favorable cross-currency movements witnessed over the quarter in US Dollar terms. The average realised Rupee/US Dollar rate during 2QFY2010 was lower by 0.7% qoq at Rs48.34, as the Rupee continued to appreciate vis-à-vis the US Dollar. On the back of higher volume growth and strong margin improvement, TCS recorded an impressive 6.8% qoq increase in its 2QFY2010 Bottom-line. On a yoy basis, TCS's Bottom-line grew by a strong 28.7%. TCS added 30 new clients during 2QFY2010, of which 11 new client wins were for its Banking product, TCS BaNCS. During the quarter, TCS added a gross of 5,530 employees and a net of 320 employees, taking the total headcount (including subsidiaries) to 1,41,962 employees. At the CMP, the stock is trading at 17.2x its FY2011E EPS. We thus upgrade the stock to a Buy, with a target price of Rs 708, implying a P/E ratio of 20x the FY2011E EPS," says Angel Broking's research report.

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