Buy Tata Consultancy Services; target of Rs 3600: ICICI Direct

ICICI Direct's research report on Tata Consultancy Services

Tata Consultancy Services (TCS) reported a healthy set of Q3FY21 numbers that were above our estimates on all fronts. Growth happened across geographies and verticals. The QoQ growth in revenues was led by healthy demand in core transformation services and conversion from earlier deals. US$ revenues grew 5.1% QoQ to $5,702 million, above our estimate of 3.6% QoQ growth and $5,619 million estimate. EBIT margins expanded 42 bps QoQ to 26.6%, above our estimates of 25.1%. TCS has declared an interim dividend of Rs 6 per share. The company aspires to register double digit revenue growth in FY22E.

Outlook

Hence, we maintain our BUY rating on the stock with a revised target price of Rs 3,600/share (PE of 29x on FY23E EPS) (from an earlier target price of Rs 3,410).