Neutral TCS; target of Rs 3770: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on TCS

TCS reported an in line revenue growth of 4% QoQ CC in 2QFY22. However, USD revenue growth (2.9% QoQ) missed our estimate of 3.7% QoQ growth. EBIT margin expanded by 10bp QoQ to 25.6%, but was lower than our estimate of 26.2%, on supply side challenges. PAT stood at INR97b, up 6.9% QoQ, aided by higher other income and stable ETR. The company reported an OCF/PAT of 103% and a FCF/PAT of 97% on good working capital management, indicating the ability to generate strong cash flow. 1HFY22 USD Revenue/EBIT/PAT grew 19.1%/20.6%/28.4% YoY.

Outlook

We remain positive on the company, given its strong growth outlook. But high valuations leave limited room for disappointment. A miss on estimates in 2QFY22, coupled with a soft margin outlook, can result in near term pressure on the stock. Our TP of INR3,770 per share implies 31x FY23E EPS. We maintain our Neutral rating.

For all recommendations report, click here

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