Buy Tata Consultancy Services target of Rs 3776: Prabhudas Lilladher

Prabhudas Lilladher's research report on Tata Consultancy Services

Revenue grew by +2.7% QoQ in USD (PLe: 3.6%, Cons: 3.5%) led by strong growth in core verticals and markets (+4.1% QoQ CC), offset by decline in India business due to impact of second wave of COVID. Revenue lost (~INR 3.5 Bn) in India business is expected to come back in coming quarters as COVID situation improves. Almost all sectors had healthy sequential growth led by BFSI (+3.1 QoQ CC), Retail and CPG (+4.4% QoQ CC), Life Sciences and Healthcare (+7.3% QoQ CC) and Tech Services (+5% QoQ CC). Management mentioned that demand environment continues to be strong with signs of recovery in discretionary retail, travel and hospitality.

Outlook

Our EPS estimates marginally declined by average 1.5% in FY22E & FY23E. We project revenue growth of 16.3%/11.7% $ terms for FY22/23E respectively. We now value TCS on 30X on Sep-23E earnings of INR126 to arrive at a changed TP of INR 3776 (earlier:3588). We have introduced FY24 estimates to capture sustainable strong demand into our numbers and valuations.

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