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Last Updated : Apr 26, 2012 02:26 PM IST | Source: Moneycontrol.com

Hold TCS; target Rs 1150: Emkay

Emkay Global Financial Services has recommended hold rating on Tata Consultancy Services (TCS) with a target price of Rs 1,150, in its April 23, 2012 research report.

 
 
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Emkay Global Financial Services has recommended hold rating on Tata Consultancy Services (TCS) with a target price of Rs 1,150, in its April 23, 2012 research report.


"Tata Consultancy Services (TCS), delivered another consistent qtr with rev growing by ~2.4% QoQ, however margins declined by ~150 bps QoQ. Profit beat aided by better margins and lower taxes. Opmetrics performance mixed. Top clients grew lower than co. Fin Svcs flat QoQ with Others Segment growing by ~23% QoQ (drove~50% of seq inc). US/UK grow by 3%/4.4% QoQ. Mgmt confident of growing higher than industry and expects pick up in fin svcs sequentially starting from Q1FY13. Fin Svcs account for 3 of the 6 large deals during the qtr. FY13/14E EPS remain unchanged at ~Rs 63.2/71."


"TCS's mgmt commentary remains confident despite the fluid demand environment (and should further reassure investors after an inline show by HCL Tech that demand is not falling ‘off the cliff' as Infy results indicated) . While fin svcs rev were down marginally by 0.2% QoQ, mgmt remains confident of pick up in business from Q1FY13 onwards given that 3 of the 6 large deals announced during the qtr came in from the segment. Further mgmt indicated that it was seeing ‘better visibility' than the recent months as rampups on some of the discretionary projects have started. Company plans to roll out ~8% offshore wage increases (6-10% range) and ~2-4% onsite wage increases for FY13 and plans to hire ~50k people on a gross level in FY13 (V/s 70k+ in FY12). We note that utilization remains the biggest op margin lever for TCS in FY13 (down ~600 bps from historical highs) given that the company has built a significant bench through FY12."


"We retain our FY13/14E earnings at ~Rs 63.2/71. Rollover to FY14 earnings drives an increase in target price to Rs 1,150 (V/s Rs 1,075 earlier). In our view TCS's results/commentary continues to indicate that although demand remains fluid, Infy's struggles are primarily company specific and other peers continue to fare relatively better. 'Lack of negative surprises' is good news in our view and stock could trade firm given reasonable results and a confident commentary. Hold the stock," says Emkay Global Financial Services research report.


FIIs holding more than 30% in Indian cos


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To read the full report click on the attachment



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First Published on Apr 26, 2012 02:23 pm
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