Dolat Capital's research report on Tata Consultancy Services
TCS reported a USD revenue growth of 0.7% QoQ (1.8% QoQ in CC terms) to USD 5,250 million (DCMe: USD 5,298 million), a marginal rise due to cross currency headwind. INR revenue grew 1.3% QoQ at ` 373.4 billion (DCMe: ` 381.6 billion), helped by INR depreciation. The EBIT margin declined 90bps QoQ at 25.6% (DCMe: 26.7%), due to the negative impact of cross currency movement and cost on account of headcount addition, which offset the positive impact of rupee depreciation. PAT grew 2.6% QoQ to ` 81.1 billion (DCMe: ` 82.7 billion) as other income rose.
Outlook
TCS is currently trading at a fair valuation of 20.3x/17.6x based on FY20/FY21 earnings. However, the stock has corrected by 5% from our last quarter update, which leads us to upgrade the stock to ACCUMULATE with a TP of ` 2,100 based on 20x rolling one-year fwd. PER.
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