TCS gains 3% on robust Q3; Here's what brokerages say
Tata Consultancy Services shares gained 3 percent on Tuesday following its better-than-expected performance in the third quarter and several brokerages raised their earnings forecast.
January 15, 2013 / 11:12 IST
Moneycontrol Bureau
Tata Consultancy Services shares gained 3 percent on Tuesday following its better-than-expected performance in the third quarter and several brokerages raised their earnings forecast.Late on Monday evening, TCS reported a third quarter net profit of Rs 3,551 crore, up 1 percent quarter-on-quarter, helped by new deal wins. The India's largest software services exporter's revenue rose 3 percent sequentially to Rs 16,070 crore. N Chandrasekaran, the company's CEO said that deal pipeline remained strong and there was no cause of worry on clients' spending. He reiterated that the company would grow faster than the 11-14 percent industry growth projected by NASSCOM."TCS has delivered quarter after quarter, justifying premium valuations over peers, we believe. Our view has been that 2013 is likely to be a better year for Indian IT as far as demand is concerned," said analyst Vishal Agarwal of Jefferies, maintaining a "buy" on the stock with a Rs 1,550 target price.Jefferies has raised its FY2013 earnings per share forecast on TCS to Rs 71 from Rs 69.8, for FY2014 to Rs 81.3 from Rs 80 and for FY2015 to Rs 90.7 from Rs 89.5.It has also raised its EBITDA forecast on TCS by 2 percent for FY2013, 2014 and by 1 percent for FY2015.Morgan Stanley too is bullish on TCS and said that to some extent signs are visible that 2013 would be a better year than 2012, something which TCS has consistently said."We expect TCS to deliver 13 percent and 15 percent US dollar revenue growth in FY13 and FY14 respectively, which appears realistic and achievable in the current environment in our view," said Morgan Stanley analysts Vipin Khare and Gaurav Rateria. They have a "overweight" rating on the stock, with a Rs 1,415 target price.Pratish Krishnan and Sarvesh Samdani of Antique Stock Broking also maintain a "buy" on TCS with Rs 1,450 target price. They have raised their FY2013 and FY2014 earnings estimates by 5 percent and 3 percent respectively.However, some analysts now believe that although the company has yet again posted strong growth, its high valuations may cap stock upside."Even as we like TCS' execution, full valuations prevent us from taking a constructive view," said Kawaljeet Saluja and Rohit Chordia of Kotak Institutional Equities, putting a "reduce" on the stock with Rs 1,320 target price.Nomura Financial Advisory and Securities India maintained a "neutral" rating on the stock, even as it raised the target price to Rs 1,470 from Rs 1,380, based on 17 times one-year rolling forward earnings forecast."We continue to expect TCS to outperform Infosys on revenue and EPS growth and value TCS at a 10% premium to Infy on greater growth predictability and better control on margins," Nomura analysts Ashwin Mehta and Pinku Pappan said.Also Read: Infosys up further as brokerages upgrade ratings, forecastAt 10:30 hrs, TCS was up 2.1 percent at Rs 1,361.85 on NSE. Nachiket Kelkar
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