ICICI Direct's research report on Tata Consultancy Services
Tata Consultancy Services (TCS) reported healthy Q2FY21 results that were above our estimates. The company reported 4.8% QoQ growth in dollar revenues (in constant currency terms), above our estimate of 2.6% QoQ growth. The growth was broad based across geographies and verticals. Margins increased 260 bps mainly due to an improvement in gross margins and lower SG&A expenses. The TCS board has approved a buyback of Rs 16,000 crore to buy back ~5.33 crore shares at Rs 3,000/share. The company has also declared an interim dividend of Rs 12/share (the record date is October 15, 2020 while payment date is November 3, 2020).
Outlook
Hence, we now assign 28x P/E to the company’s FY23E EPS. Based on this, we arrive at a target price of Rs 3300/share and upgrade the stock from HOLD to BUY.
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