Reduce Tata Consultancy Services; target of Rs 3300 : Dolat Capital Market

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Dolat Capital Market's research report on Tata Consultancy Services

TCS reported revenue growth of 4.1% QoQ in CC terms (DE: 3.2%) led by broad-based growth across verticals. Postbank deal is not included in Q3. OPM improved by 350bps to 26.6% (DE: 23.1%). Adjusted OPM improved by 42bps despite full quarter impact of wage hike. Signed TCV of US$6.8bn (BFSI $2.6bn, Retail $1bn) implying 1.44x revenue coverage on TTM basis. TCV in Q3 witnessed the closure of multiple large deals which were delayed and expects normalized large deal closure hereon. In Q3, N-America TCV remained strong at $4Bn. TCS is confident to achieve ‘double digit growth’ for CY21/FY22E as it expects cloud adoption led multi-year growth opportunity which will ensure sustained momentum. TCS believes that its growth is led by differentiated capabilities driving market share gains (evident from strong deal wins) as client is migrating workflows on cloud.

Outlook

Strong result beat, continued positive stance on transformation, improved large closure and strong TTM TCV of $31.2Bn provide us comfort for medium term. Factoring the same we have upgraded our EPS estimates by ~7 over FY21-FY23E and value TCS at TP of Rs3,300 valued at 30xFY23E earnings (3x on PEG basis).

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