Sharekhan bullish on Tata Consultancy Services has recommended buy rating on the stock with a target price of Rs 3500 in its research report dated April 19, 2018.
Sharekhan's research report on Tata Consultancy Services
During Q4FY2018, Tata Consultancy Services (TCS) delivered the highest incremental dollar revenue ($185 million) on sequential basis in the history of Q4, despite seasonality issues. Revenue growth was driven by strong performance in verticals such as energy & utilities and travel & hospitality along with geographies in Europe and APAC (Japan grew in double digits). TCS reported a higher-than-expected constant currency (CC) revenue growth of 2% QoQ in Q4FY18, led by volume growth of 2% QoQ. On a reported basis, revenues were up by 3.9%QoQ at $4,972 million. EBIT margins improved by 22bps QoQ to 25.4% (below our estimates) despite higher bonus payouts to employees, driven by currency benefits (40 bps). Net income during the quarter increased by 5.7% QoQ to Rs.6,904 crore. In FY2018, the revenue increased by 6.7% YoY on CC basis and 8.6% YoY on reported basis. EBIT margin contracted ~90bps YoY at 24.8% in FY2018, owing to wage hikes above industry standards, localisation and structuring innovative deals.
we expect TCS to continue to trade at a premium to its peers. Hence, we upgrade our rating on the stock to Buy from Hold with a revised price target (PT) of Rs. 3,500.
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