Hold Tata Consultancy Services; target of Rs 1880: ICICI Direct

ICICI Direct recommended hold rating on Tata Consultancy Services with a target price of Rs 1880 in its research report dated dated October 12, 2018.

Broker Research

October 12, 2018 / 17:00 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on Tata Consultancy Services

TCS reported healthy constant currency (CC) revenue growth of 3.7% QoQ (vs. our estimate of 3.9% QoQ) and rupee depreciation led margin expansion. In US$ terms, revenues grew 3.2% QoQ to $5,215 million mainly led by healthy demand from BFSI (31% of overall revenues) and retail (17% of overall revenues) vertical Rupee revenues grew 7.6% QoQ to Rs 36,854 crore, above our 6.3% growth expectations of Rs 36,403 crore estimate At 26.5%, EBIT margins expanded 150 bps QoQ (vs. our 26.5% estimate) mainly on account of rupee depreciation benefit (120 bps) and operational efficiency (30 bps) PAT of Rs 7,901 crore was in line with our Rs 7,905 crore.

Outlook

TCS reported a healthy performance across business segments though it was in line with our expectations. The positive outlook for BFSI and retail, pick-up in deal sizes and rupee depreciation are expected to play out well on the profitability front. However, keeping in perspective the macro environment uncertainty, we lower our valuation multiple to ~20x FY20E EPS and maintain our HOLD rating on the stock with a revised target price of Rs 1880.

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