Buy TCS; target of Rs 4660: Motilal Oswal

Motilal Oswal's research report on TCS

TCS reported revenue of USD7.5b in 1QFY25, up 1.9% QoQ in USD terms, beating our estimate of ~1.3%. Growth was driven by strong performances in India (up 14.1% QoQ/59.0% YoY, aided by BSNL scale-up), the UK (up 2.5% QoQ) and North America (up 0.9% QoQ). TCS reported a deal TCV of USD8.3b, within its usual range but down 37.1% QoQ and 18.6% YoY. The book-to-bill ratio was 1.1x. BFSI, particularly the banking clients in the US, returned to growth in the quarter. The nature of demand was largely the same, and clients continued to prioritize cost optimization projects.

Outlook

We have broadly maintained our FY25/FY26 EPS estimates. Over FY24-26E, we expect a USD revenue CAGR of ~6.9% and an INR EPS CAGR of ~10.9%. Our TP of INR4,660 implies 30x FY26E EPS, with a 19% upside potential. We reiterate our BUY rating on the stock.

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