Arihant Capital has given Neutral recommendation for TCS with a target price of Rs. 3720 in its research report issued on Apr 12, 2022

Arihant Capital’s research report on TCS

TCS Q4FY22, Revenue in CC term slightly below estimate; EBIT margin in-line with estimate. Constant Currency Revenue growth +11.8% YoY/2.6% QoQ to $6,696 Mn against our estimate $6,720 Mn. Reported revenue of INR (up 3.5% QoQ/15.8% YoY) at INR 50,591 cr against our estimate INR 50,479 cr. EBIT margin was down 7bps QoQ/189bpsYoY at 25% in line with the estimates. The growth in revenue was broad-based led by strong performance in Retail and CPG (22.1%), Manufacturing vertical (+19%), and Communications & Media (+18.7%). Consolidated PAT stood at INR 9,806 Cr, up by 12.4% YoY/1.6% QoQ against our estimate of INR 9,899 Cr. •All time high order book and headcount addition increase strength in demand •$11.3 Bn in Q4 Highest ever TCV, 2 mega deals signed in Q4 totalling $1BLn. The demand continued to be strong during the quarter as well as the full year across all markets, industries, and services, with growth led by Cloud, Cyber Security, Enterprise Application Services, and IoT & Digital Engineering. Clients $100M+ up by 10 ; $50M+ up by 19 ; $10M+ up by 52 & $1M+ up by 86 YoY. Buyback FY22: INR 31,424 Cr of cash returned to shareholders through buybacks and dividends. Final Dividend per share (proposed) INR 22 per share.The company has mentioned that the incremental attrition has moderated at 17.4% vs 15.3%.

Outlook

TCS in-line operating performance in Q4FY22, revenue rose in the seventh straight quarter on all-time high order book as clients continue to spend on digital services. We believe the demand environment to remain strong over the medium term. However, we remain constructive on TCS from medium to long term with its ability to engage with large clients (TCV $11.3bn) for their large transformation programs. At a CMP of INR 3,696, TCS is trading at a P/E of ~27x to its FY24E EPS of ~INR133. We value TCS at a PE of 28x to its FY24E EPS of ~INR 133, which yields a target price of INR 3,720 per share. We downgrade our rating to Neutral from Hold earlier.

More Info

At 17:30 Tata Consultancy Services was quoting at Rs 3,691.45, down Rs 4.95, or 0.13 percent.

It has touched an intraday high of Rs 3,738.60 and an intraday low of Rs 3,650.05.

It was trading with volumes of 283,042 shares, compared to its thirty day average of 113,927 shares, an increase of 148.44 percent.

In the previous trading session, the share closed up 0.26 percent or Rs 9.55 at Rs 3,696.40.

The share touched its 52-week high Rs 4,045.50 and 52-week low Rs 3,004.80 on 18 January, 2022 and 03 May, 2021, respectively.

Currently, it is trading 8.75 percent below its 52-week high and 22.85 percent above its 52-week low.

Market capitalisation stands at Rs 1,365,486.32 crore.

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