Hold TCS; target of Rs 1309: KRChoksey

KRChoksey has recommended hold rating on Tata Consultancy Services with a target of Rs 1309 in its September 18, 2012 research report. According to the research firm, geography-wise growth is registered across all major markets,US, UK, Continental Europe. Expects Latin American, APAC market to continue to outperform overall TCS’s growth rate.

“Tata Consultancy Services (TCS)has seen no cancellation of projects unlike Infosys which registered cancellation of discretionary project by European client in the previous quarter. This indicates that cancellation of projects is company and client specific issues rather than industry wide trend. Moreover, they witness strong demand from clients in Retail, Insurance, Manufacturing and Hi-tech. In concern area i.e. banking sector the company continues to register momentum in both ‘Run-the-Business’ and Discretionary projects; however they expressed concern for telecom sector. Geography-wise growth is registered across all major markets i.e. US, UK and Continental Europe and expects Latin American and APAC market to continue to outperform overall company’s growth rate.”

“The management expects EBITDA margin to be under pressure in Q2 FY13E despite visa cost which is seasonal in nature is primarily incurred in Q1 FY13. The margins will be under pressure on account of increase in onsite revenue mix and adverse trend in exchange rate i.e. INR appreciation against the major global currencies.  The company has indicated that it is too early for clients to give clear cut directions in respect of their IT plans for CY13E; however their initial discussions gives them optimism that the next calendar year will be better than CY12E in terms of IT spend by clients. Moreover, the management has indicated that inspite expectation of improvement in demand environment they expect the contribution of discretionary segment in total revenue to remain unchanged in mid-term.”

“We continue to be optimistic about business prospects for TCS especially considering momentum in its largest segment i.e. BFSI segment. However, we believe the same is reflected in consensus expectation and valuation premium assigned to the company. Hence, we believe there is limited upside to the stock price from current level and considering the same we recommend “HOLD” on the stock with target price of Rs.1,309 by assigning multiple of 17 times to its FY14E EPS of Rs.77,” says KRChoksey research report.

Institutional holding more than 40% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More