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Last Updated : Oct 08, 2020 03:50 PM IST | Source: Moneycontrol.com

Buy Tata Consultancy Services; target of Rs 3200: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Tata Consultancy Services has recommended buy rating on the stock with a target price of Rs 3200 in its research report dated October 08, 2020.

Broker Research

Prabhudas Lilladher's research report on Tata Consultancy Services


TCS reported strong beat on revenue growth at 7.2% QoQ in USD terms to $5424 m was way above our & street expectations (3%) (Ple: $5284, Cons: $5,291mn). CC revenue growth is at 4.8% QoQ (PLe: 2.7%, Cons: 2.9%) & +3.2% YoY. Revenue growth was led by broad based recovery across segments (BFSI:6.2% QoQ, Retail: 14.6% QoQ, Manufacturing: 9.4% QoQ, Life Sciences: 9.8 % QoQ CC terms). Accelerated business value realization of their customers’ digital investments resulted in broad-based revenue growth & Demand recovery has now strong legs with sustained demand momentum. Margins were at 8Q high at 26.2% (Ple:25.1%, Cons:24.9%) which led to strong beat in PAT at INR84.3bn (Ple: INR:81bn). Management mentioned that margins can be sustained at this levels as growth will help to drive the margins, although there may be some impact from wage hike/ promotions announced in Q3 but growth is the best margin lever & they are working on various other operational levers also. TCS showed strong hiring trend also increase of 9864 employees QoQ (highest in last 3 quarters) & announced salary hikes from 3Q along with hiring rebounding suggesting improving visibility.


Outlook


TCV was up 34% QoQ to US$8.6bn & quarter’s deal pipeline has been characterized by a very broad-based pickup in deal signings for relatively mid-and small-sized deals as opposed to very large deals. NA deal win was at US$ 3.2bn, BFSI was at US$ 1.7bn & Retail & CPG was at US$1bn. The strong order book, a very robust deal pipeline, and continued market share gains gives them confidence for the future. We have increased our estimates by 5% for FY22/23 which were led by strong revenue & sustainable margin performance & value TCS on 30X (earlier:27X) Sep-22 target multiple to arrive at a changed TP of INR 3200 (earlier: Rs.2738).

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First Published on Oct 8, 2020 01:00 pm
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