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TCS has a good fourth quarter, here is what brokerages have to say

CLSA, Macquarie and Credit Suisse have maintained 'outperform' call, while Goldman Sachs has a 'buy' rating on TCS.

April 13, 2021 / 11:59 AM IST
Tata Consultancy Services (TCS) has reported a 6.3 percent sequential growth in March quarter consolidated profit at Rs 9,246 crore. The company's revenue grew by 4 percent to Rs 43,705 crore compared to the previous quarter. The revenue in dollar terms grew by 5 percent sequentially to $5,989 million against 5.1 percent growth seen in the previous quarter.
Tata Consultancy Services (TCS) on April 12 reported a 6.3 percent sequential growth in March quarter consolidated profit at Rs 9,246 crore. The company's revenue grew by 4 percent to Rs 43,705 crore compared to the previous quarter. The revenue in dollar terms grew by 5 percent sequentially to $5,989 million against a 5.1 percent growth seen in the previous quarter. (Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.)
CLSA | Rating: Outperform | Target: Raised to Rs 3,560 from Rs 3,370. CLSA lifted FY22/FY23 EPS estimates by 3 percent/2 percent on Q4 margin defence and USD-INR rate reset. The valuations are optically rich and limit absolute upside. The cash generation and liberal capital return policy should help to sustain outperformance. The macro demand strength should sustain its relative outperformance versus the broader market.
CLSA | Rating: Outperform | Target: Raised to Rs 3,560 from Rs 3,370. CLSA lifted FY22/FY23 EPS estimates by 3 percent/2 percent on Q4 the margin defence and USD-INR rate reset. The valuations are optically rich and limit absolute upside. The cash generation and liberal capital return policy should help the company to sustain outperformance. The macro demand strength should sustain its relative outperformance versus the broader market.
Goldman Sachs | Rating: Buy | Target: Rs 3,646. TCS is one of the best-positioned global IT services companies. The key positive surprise from the results was the very strong order book of $9.2 billion. The order book is largely of smaller sized deals, implying faster revenue conversion. The management sees double-digit revenue with the current margin band beyond FY22.
Goldman Sachs | Rating: Buy | Target: Rs 3,646. TCS is one of the best-positioned global IT services companies. The key positive surprise from the results was the very strong order book of $9.2 billion. The order book is largerly smaller deals, implying faster revenue conversion. The management sees double-digit revenue with the current margin band beyond FY22.
Credit Suisse | Rating: Outperform | Target: Rs 3,750. It was a strong end to the year with the company well-positioned for a robust FY22. With largely in-line performance, the broking house maintains FY22/23 estimates. The sector has entered technology upcycle and the company is expected to continue delivering industry-leading growth.
Credit Suisse | Rating: Outperform | Target: Rs 3,750. It was a strong end to the year with the company well-positioned for a robust FY22. With largely in-line performance, the broking house maintains FY22/23 estimates. The sector has entered a technology upcycle and the company is expected to continue delivering industry-leading growth.
Macquarie | Rating: Outperform | Target: Rs 3,640. The company is on track to double-digit growth for FY22 and well-positioned to benefit from three key spending themes.
Macquarie | Rating: Outperform | Target: Rs 3,640. The company is on track to double-digit growth for FY22 and well-positioned to benefit from three key spending themes.
Citi | Rating: Sell | Target: Raised to Rs 2,935 from Rs 2,870. The valuations were at 31x 1-year forward price in all positives. Citi raise EPS estimates by 2 percent for FY22/23, partly on USD-INR rate but continues to prefer Infosys over TCS.
Citi | Rating: Sell | Target: Raised to Rs 2,935 from Rs 2,870. The valuations were at 31x 1-year forward price in all positives. Citi raises EPS estimates by 2 percent for FY22/23, partly on the USD-INR rate but continues to prefer Infosys over TCS.
Dolat Capital | Rating: Reduce | Target: Rs 3,370. We believe TCS and other Tier-I IT companies will continue to deliver strong revenue momentum over the four-six quarters (translating into double-digit revenue growth) and thus would sustain current valuations of 25x-30x, which implies 3x on PEG basis.
Dolat Capital | Rating: Reduce | Target: Rs 3,370. We believe TCS and other Tier-I IT companies will continue to deliver strong revenue momentum over the four-six quarters (translating into double-digit revenue growth) and thus would sustain current valuations of 25x-30x, which implies 3x on PEG basis.
Motilal Oswal | Rating: Neutral | Target: Rs 3,250. The company has consistently maintained its market leadership and shown best-in-class execution. This gives the company room to increase its margin, while demonstrating industry-leading return ratios. We have left our estimates unchanged as we have factored in double-digit growth for the company in FY22E.
Motilal Oswal | Rating: Neutral | Target: Rs 3,250. The company has consistently maintained its market leadership and shown best-in-class execution. This gives the company the room to increase its margin, while demonstrating industry-leading return ratios. We have left our estimates unchanged as we have factored in double-digit growth for the company in FY22E.
JPMorgan | Rating: Overweight | Target: Raised to Rs 3,640. The Q4 earnings were a class act in balancing unexpected growth with profitability. There was a secular growth across geographies and vendors with strong signing momentum. With 1.5x book to bill and an 8 percent exit rate, the underwrite mid-teens growth in FY22. The management continues to target sustainable double-digit growth over the medium term. JPMorgan upgrades FY22-23 revenue estimates by 1-2 percent and EPS by 3-4 percent.
JPMorgan | Rating: Overweight | Target: Raised to Rs 3,640. The Q4 earnings were a class act in balancing unexpected growth with profitability. There was a secular growth across geographies and vendors with strong signing momentum. With 1.5x book to bill and an 8 percent exit rate, it underwrite mid-teens growth in FY22. The management continues to target sustainable double-digit growth over the medium term. JPMorgan upgrades FY22-23 revenue estimates by 1-2 percent and EPS by 3-4 percent.
Prabhudas Lilladher | Rating: Buy | Target: Rs 3,636. Our estimates largely remain unchanged for FY22/23E. We project revenue growth of 15.3 percent/11.5 percent in dollar terms for FY22/23E, respectively. We believe TCS margin performance will sustain as 1) strong uptick in offshore delivery, 2) well-managed supply-side challenges—fresh hiring, reskilling, lower-wage inflation, lower attrition, 3) strong efficiencies in sales, deal transition and delivery with WFH, 4) structural cost-saving benefits (employee pyramid, travel costs, marketing costs etc).
Prabhudas Lilladher | Rating: Buy | Target: Rs 3,636. Our estimates largely remain unchanged for FY22/23E. We project revenue growth of 15.3 percent/11.5 percent in dollar terms for FY22/23E, respectively. We believe TCS margin performance will sustain as 1) strong uptick in offshore delivery, 2) well-managed supply-side challenges—fresh hiring, reskilling, lower-wage inflation, lower attrition, 3) strong efficiencies in sales, deal transition and delivery with WFH, 4) structural cost-saving benefits (employee pyramid, travel costs, marketing costs, etc).
Rakesh Patil
first published: Apr 13, 2021 11:56 am

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