Hold TCS; target of Rs 1850: ICICI Direct

ICICI Direct recommended hold rating on TCS with a target price of Rs 1850 in its research report dated June 18, 2018.

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September 18, 2018 / 15:48 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on TCS

TCS board has approved a proposal to buy back shares for an aggregate amount not exceeding Rs 16,000 crore. TCS will repurchase upto 7.6 crore of shares (1.99% of its equity) at Rs 2,100/share (~14% premium to CMP). The buyback along dividend payout is broadly in line with management intention of pay out ~80-100% of FCF to shareholders. It should also improve its return ratio by 400-500 bps as buyback + dividend payout should utilise (~50% of its cash & investments). We also upgrade our EPS estimates by 3-5% on account of revision in exchange rate (Rs 67 for FY19E & FY20E). Nonetheless, we maintain our Hold recommendation with revised price target of Rs 1850/share due to rich valuation.

Outlook
TCS management commentary on broad based recovery coupled with large deal win, we anticipate acceleration in revenues growth trajectory. We now also consider 3-5% EPS upgrades on account of sharp depreciation of rupee, which would also provide margin tailwind. Nonetheless, we maintain our HOLD stance on TCS on account of rich valuation and revise our target price at Rs 1850/share (22x FY20E EPS).

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