Buy TCS; target of Rs 4220: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on TCS

IT services companies should see acceleration in structural growth over the medium term as corporates embark on a multi-year cloud-led upgrade cycle. This shift in the business model should lead to a substantial increase (5% revenue v/s 3% historically) in the tech budgets of enterprise clients, adding 5-6% incremental growth for the industry. Growth in the cloud would anchor this phase of technology spending, which would see a mid to high teen growth rate. Along with continued double-digit growth in digital services, this should more than compensate for the decline in traditional services. In our view, TCS is among the best positioned companies to benefit from this structural spending uptick, and hence are upgrading the stock to Buy rating. We expect TCS to benefit from the sustained growth given its 1) strong organic capabilities, 2) diverse vertical and geographic presence, 3) deal win momentum, and 4) strong headcount additions.

Outlook

We are turning positive on the company given the strong growth potential. Our TP of INR4,220 implies 30x FY24E EPS. We upgrade our rating to Buy.

For all recommendations report, click here

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