Buy Tata Consultancy Services: target of Rs 4400: Sharekhan

Sharekhan's research report on Tata Consultancy Services

TCS’ strong engineering heritage, earlier investments in capabilities, best-in-class talent retention and diverse capabilities position it to become clients’ preferred digital transformation partner. Strong spending outlook of BFSI firms would augur well for TCS given its strong leadership across geographies, robust contextual knowledge and domain expertise. A large number of short-cycle programs and medium-sized deals, with a focus on book-to-bill ratio of 1.2-1.5x, would drive TCS’ strong revenue growth in the medium-term. USD revenue and earnings would clock an 11%/14% CAGR over FY2022-24E.

Outlook

We expect the stock to start outperforming broader indices given strong large deal TCV momentum, industry-leading margin performance, strong revenue growth potential, digital share gains and higher dividend payouts. Hence, we maintain a Buy with a PT of Rs. 4,400.