Neutral TCS; target of Rs 3250: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on TCS

Tata Consultancy Services (TCS) reported revenue growth of 4.2% QoQ CC in 4QFY21 (v/s our estimate of 3.4%), delivering its third consecutive quarter of broad based (over 4% QoQ) growth. It marginally improved its EBIT margin to 26.8% (+20bp QoQ/+170bp YoY). The same was below our estimate (27.2%) on ramp up of large deals. Deal wins in 4QFY21 stood at USD9.2b, the highest in its history, with a book-to-bill ratio of 1.5x. A good 4Q helped it report sales (USD)/EBIT/PAT growth of 0.6%/10%/0.4% in FY21. Strong recovery from TCS, post the initial phases of the COVID-19 pandemic, indicates continued strength in the tech spending environment, along with its ability to capture outsized market share. The management commentary on enterprise demand, especially on Cloud, implies a positive outlook for peers as well. It also highlighted a robust pipeline, with a mix of small/mid-sized deals along with a few large ones, giving it confidence on client spends.

Outlook

Our TP implies 26x FY23E EPS. While we remain positive on the company, we remain Neutral given its rich multiples.

For all recommendations report, click here

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