Buy Tata Consultancy Services; target of Rs 3915: KR Choksey

KR Choksey is bullish on Tata Consultancy Services has recommended buy rating on the stock with a target price of Rs 3915 in its research report dated July 14, 2023.

July 16, 2023 / 11:29 IST

Buy

KR Choksey's research report on Tata Consultancy Services

TCS revenue for Q1FY24 stood at INR 5,93,810 mn as against INR 5,27,580 mn, registering a growth of 12.6% on a YoY basis and increased marginally by 0.4% on a QoQ basis from INR 5,91,620 mn. Revenue in dollar terms stood at USD 7226 mn as against USD 6780 mn, registering a growth of 6.6% on a YoY basis and remaining subdued on a QoQ basis. EBIT for the quarter came at INR 1,37,550 mn as against INR 1,21,860 mn, showing an improvement of 12.9% on a YoY basis and declining by 5.0% on a QoQ basis from INR 1,44,800 mn. Operating margins showed an improvement of 6 bps on a YoY basis and declined by 132 bps on a QoQ basis. Profit for Q1FY24 registered a growth of 16.8% on a YoY basis to INR 1,11,200 mn as against INR 95,190 mn in Q1FY23 and declined by 2.8% from INR 1,14,360 mn. PAT margin for Q1FY24 stood at 18.7%, registering an improvement of 70 bps on a YoY basis and a decline of 60 bps on a sequential basis.

Outlook

TCS is currently trading at a valuation with a P/E multiple of 26.5x/23.1x on FY24E/FY25E earnings. Despite persistent global macro uncertainties, TCS is well positioned with its size, steadfast market leadership position, best-in-asset class execution and order book (especially exposure to longer duration contracts) to deliver industry-leading growth/margin and demonstrate superior return ratios and hence we have changed our target price as INR 3,915 (Previously the target price was INR 3,888) with a P/E multiple of 27.0x to the FY25 with an estimated EPS of ~INR 145.0, an upside of 16.7% over the CMP. Accordingly, we maintain our “BUY” rating for the stock.

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