Accumulate Tata Consultancy Services; target of Rs 3663: Arihant Capital

Arihant Capital's research report on Tata Consultancy Services

TCS has reported Q1FY22 numbers below our estimate. TCS has reported consolidated revenue of INR 45,411 Cr, +18.5% YoY/3.9% QoQ in Q1FY22 against our estimate of INR 45,890 cr. Consolidated EBIT stood at INR 11,588 Cr, up by 28.1% YoY/-1.2% QoQ against our estimate of INR 11,706 Cr. On the margins front, EBIT margin improved by 2552bps YoY/ contracted 133bps QoQ to 25.5% in-line with an estimate but given higher attrition and hiring with a wage hike, and strong growth across all verticals. Consolidated PAT saw a rise of 28.1% YoY/-2.7% QoQ to INR 9,031 Cr against our estimate of INR 9,568 Cr. Constant Currency Revenue growth +21.6% YoY/2.8% QoQ to (Mn USD) 6,154 against our estimate 6,204 (Mn USD).

Outlook

We value TCS at PE of 30x to its FY23E EPS of INR 122.1, which yields a target price of INR 3,663 per share. We upgrade our rating to Accumulate from Neutral earlier.

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