Buy Tata Consultancy Services; target of Rs 2130: HDFC Securities

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26 Aug, 2025 12:21

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HDFC Securities 's research report on Tata Consultancy Services

Our  optimism has admittedly trailed TCS’ recent performance. Our (belated) upgrade derives from confidence on TCS’ growth trajectory, supported by (1) Scale  and growth dominance of Digital business (25% of rev and 45.5% YoY), (2)  Growth visibility (deal wins), (3) Strong recovery and outlook in BFSI vertical  (across  geos)  and  NorthAm  geography  and  (4)  Continuity  in efficient capital allocation (80 to 100% of FCF as payout).

Outlook

We  have  factored USD rev growth of 10% and 10.1% for FY19/20E, implying  2.3/2.4%  CQGR,  respectively. EBIT at 25.5/26.2% is rock steady. Upgrade  to  BUY  (Neutral  earlier)  with  TP  of Rs 2,130, 24x FY20E (20% premium to its 5-yr avg. valuations), supported by ~4.5% FCF yield and >60% RoIC.

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