KR Choksey's research report on Tata Consultancy Services
Dollar Revenue was up 3% QoQ to USD 6,333mn (KRChoksey est. USD6,488mn). Reported operating margin contracted by 57bps to 25.0% led by supply side pressures of backfilling of attrition, increased sub-contracting costs, wage interventions to retain talent and discretionary costs. Digital adoption, Agile, automation and cloud have multiyear tailwind and we expect the growth to continue on the back of strong demand environment to cloud shift and multi horizon cloud journey to play key role for TCS. As supply side pressures ease off in FY23, there is scope for margin expansion led by reducing sub-contracting costs, improved pricing, pyramid optimization, best-in-class supply side engine and leverage from growth. The company declared a dividend of INR 7 per share & a buyback of shares worth INR180bn at INR 4,500/share.
TCS is currently trading at a valuation with a P/E multiple of 31.7x/26.5x on FY23E/FY24E earnings. We expect strong deal momentum across verticals, ease in travel restrictions and continued investments in newer technologies such as product & platform which will help maintain the growth momentum in medium term future and hence we are assigning a P/E multiple of 29x to the FY24 estimated EPS of INR 147 to arrive at a target price of INR 4,256 per share, an upside of 9.1% over the CMP. Accordingly, we reiterate an “ACCUMULATE” rating to the stock.
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At 14:54 hrs Tata Consultancy Services was quoting at Rs 3,966.00, up Rs 68.35, or 1.75 percent.
It has touched an intraday high of Rs 3,966.60 and an intraday low of Rs 3,860.10.
It was trading with volumes of 258,078 shares, compared to its thirty day average of 103,347 shares, an increase of 149.72 percent.
In the previous trading session, the share closed up 1.05 percent or Rs 40.40 at Rs 3,897.65.
The share touched its 52-week high Rs 3,990.00 and 52-week low Rs 2,701.00 on 08 October, 2021 and 24 February, 2021, respectively.
Currently, it is trading 0.6 percent below its 52-week high and 46.83 percent above its 52-week low.
Market capitalisation stands at Rs 1,467,043.77 crore.
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