Buy TCS; target of Rs 5400: Motilal Oswal

Motilal Oswal's research report on TCS

TCS reported revenue of USD7.6b in 2QFY25, up 2.2% QoQ in USD terms, beating our estimate of ~1.6%. Growth was driven by India (up 21.3% QoQ/93.2% YoY, aided by BSNL ramp-up) and UK (up 2.8% QoQ), while North America was down 1.7% QoQ. EBIT margins came in ~40bp below our estimate at 24.1%. PAT was down 1.2% QoQ/up 5.1% YoY at INR120b (4.1% below our est. of INR125b). For 1HFY25, TCS’s revenue/EBIT/PAT increased by 6.5%/9.5%/6.8% compared to 1HFY24. FCF conversion came in at 86% for 1HFY25 vs. 95% for 1HFY24. TCS reported a deal TCV of USD8.6b, within its usual range, up 4% QoQ and down 23% YoY. The book-to-bill ratio was 1.1x.

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