has given Ccumulate recommendation for Tata Consultancy Services with a target price of Rs. 4256 in its research report issued on Apr 12, 2022

KR Choksey’s research report on Tata Consultancy Services

Dollar Revenue was up 2.6% QoQ to USD 6,696mn (KRChoksey est. USD6,681mn). Rupee revenue grew by 3.5% QoQ to INR 5,05,910mn (KRChoksey est. INR 5,02,487Mn). Reported operating margin contracted by 7bps to 25.0% led by supply side pressures of backfilling of attrition, increased sub-contracting costs, wage interventions to retain talent and discretionary costs. Reported Net profit grew by 1.6% QoQ to INR 99,260mn (KRChoksey est. INR 99,889mn) with margin of 19.6%. In this quarter, TCS has registered a highest ever deal bookings of USD 11.3bn (two mega deal wins >USD 1Bn in Q4). TCS is well poised to benefit from strong demand and growing digital transformation opportunities, although salary inflation and potential slowdown in Europe remain near-term concerns. As supply side pressures ease off in FY23, there is scope for margin expansion led by reducing sub-contracting costs, improved pricing, pyramid optimization, best-in-class supply side engine and leverage from growth. The company declared a dividend of INR 22 per share. Our target price of INR 4,256 is based on 31.3x Mar-24E EPS with EPS CAGR of 14.6% over FY22-24E.


TCS is currently trading at a valuation with a P/E multiple of 30.8x/27.1x on FY23E/FY24E earnings. We expect strong deal momentum across verticals, ease in travel restrictions and continued investments in newer technologies such as product & platform which will help maintain the growth momentum in medium term future and hence we are assigning a P/E multiple of 31.3x to the FY24 estimated EPS of ~INR 136 to arrive at a target price of INR 4,256 per share, an upside of 15.4% over the CMP. Accordingly, we reiterate an “ACCUMULATE” rating to the stock.

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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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