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Last Updated : Jun 09, 2012 02:50 PM IST | Source:

Hold TCS; target of Rs 1329: Nirmal Bang

Nirmal Bang has recommended hold rating on Tata Consultancy Services with a target of Rs 1329, in its June 4, 2012 research report.

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Nirmal Bang has recommended hold rating on Tata Consultancy Services with a target of Rs 1329, in its June 4, 2012 research report.

"Tata Consultancy Services’ (TCS) strong 29% EBIT growth in FY12 was offset by higher working capital, mainly higher debtor and unbilled revenue days, and higher taxes, leading to just 6% growth in OCF to Rs70.1bn. Vertical-wise, retail drove revenue growth (45% versus 31% total revenue) and profitability (315bps expansion), while geographically emerging markets like Asia Pacific (50.7%), Middle East and Africa (43.4%) were growth drivers. Europe, excluding the UK, grew at a robust pace (41.6%). From a service line perspective, all services with the exception of business intelligence clocked growth of 26-55%, implying broad-based revenue growth."

"TCS had transactions with 35 fellow Tata Group companies during FY12, apart from the holding company, Tata Sons, relating to revenue, interest, dividend, loans and advances, debtors, creditors, inter-corporate deposits, purchase of investments, debentures and purchase of goods and services. In most cases, the pecuniary value of its transactions with these entities was in low single digits with respect to the total."

"While TCS has been able to achieve considerably above industry growth and out-performed peers like Infosys and Wipro, we believe valuation is not attractive enough to buy the stock at current levels. TCS currently trades at a price-toearnings (PE) multiple of 17.6x FY13E EPS and 15.7x FY14E EPS. We roll over our valuation multiple to FY14 and upgrade our target price to Rs 1,329 (17x FY14E EPS, Rs1,200 earlier) and also our rating on the stock to Hold from Sell," says Nirmal Bang research report.

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To read the full report click on the attachment

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First Published on Jun 9, 2012 02:18 pm
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