ICICI Securities research report on Tata Consultancy Services
Tata Consultancy Services (TCS) has reported beat on both revenue (despite challenging demand environment) and margin fronts despite headwinds from BSNL deal ramp-up in Q3FY24. Management mentioned that the demand environment remains unchanged with clients still cutting down on discretionary spends and focusing on cost optimisation. However, there were a couple of statements indicating optimism for future demand – 1) TCS is gaining market share in the UK, 2) green shoots in Europe and 3) pent-up demand in some verticals may aid growth as and when client sentiment improves, though the timing of the same is still uncertain. We increase our EPS estimate by 5.5%/1.7% for FY25/26E led by an increase in margin estimates.
Outlook
We continue to value TCS at 25x on Q5-Q8 EPS of INR 155 to arrive at our revised TP of INR 3,872, with potential 4% upside. Maintain HOLD.
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