ICICI Direct recommended hold rating on Tata Consultancy Services with a target price of Rs 2400 in its research report dated July 10, 2020.
ICICI Direct's research report on Tata Consultancy Services
Tata Consultancy Services (TCS) has strong digital (new age technology) expertise which has led to the company winning large deals over the years. Going forward, global digital technologies is expected to witness robust growth (CAGR of ~20% CAGR over next five years) mainly led by business going digital and increase in work from home scenario. TCS is expected to be a key beneficiary of this trend. In addition, TCS has over the years also built strong products and platforms that have enabled it to scale existing clients efficiently while also enabling it to win new clients. Further, TCS’ Secure Borderless Workspace (SBW) delivery model and Machine First Delivery Model (MFDM) framework will provide unique differentiation for its services. This will enable it to grow its revenues above industry in coming years. This coupled with strong cash flow generation and dividend pay-out keeps us positive on the stock from a long-term perspective.
Hence, we remain positive on the stock from a long-term perspective. However, the current valuation factors in most of the positives. Hence, we maintain HOLD on the stock with a revised target price of Rs 2400.
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