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Tata Consultancy Services Ltd Research Report - 21st Jul 2016

IT | Published on Jul 21st 2016

IT

TCS posted a 3.7% sequential growth in USD revenues to US$4,362mn for 1QFY2017 (V/s US$4,375mn expected), which was mostly volume led (3.4% qoq growth). On constant currency (CC) basis, the revenue growth is of 3.1% qoq. On the operating front, the EBITDA and EBIT margins came in at 26.7% and 25.1%, a dip of ~97bp and ~98bp qoq respectively, which is mostly in line with our expectations. Consequently, the PAT came in at Rs6,317cr (V/s Rs6,151cr expected), a de-growth of 0.4% qoq. We maintain our Buy on the stock. Quarterly highlights: The company posted a 3.7% sequential growth in USD revenues to US$4,362mn for 1QFY2017 (V/s US$4,375mn expected), which was mostly volume led (3.4% qoq growth). On constant currency (CC) basis, the revenue growth is of 3.1% qoq. In terms of geography, USA posted a CC qoq growth of 2.5%, while Latin America posted CC qoq growth of 0.3%. In terms of verticals, its key industries BFSI, Retail & CPG, and Manufacturing posted a CC qoq growth of 1.7%, 2.7%, and 3.1%, respectively. On the operating front, the EBITDA and EBIT margins came in at 26.7% and 25.1%, a dip of ~97bp and ~98bp qoq respectively, which is mostly in line with our expectations. Consequently, the PAT came in at Rs6,317cr (V/s Rs6,151cr expected), a degrowth of 0.4% qoq. Outlook and valuation: With headwinds from Diligenta and Latin America behind, still an uncertain BFSI may mar the company’s growth (although the same is not currently being encountered). However, even on conservative estimates, we expect TCS to post a revenue CAGR of 12.0% in USD as well as INR terms over FY2016-18E. The stock trades at 16.6x its FY2018E EPS, which is attractive.

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CMP 2,493
Target Price 2,867
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)431,612.39
MCAP NSE (Rs in Cr)430,016.34
P/E (x)17.03
EPS (Rs.)128.66
BV (Rs.)351.48
Div Yield (%)1.99
FV (Rs.)1.00
P/BV (x)5.65
EV/Sales (x)3.91
EV/EBITDA (x)13.88

Shareholding Pattern (%)

Promoter73.0
Foreign17.0
Institution5.0
Public & Others5.0
Corporate0.0
Grand Total100.0

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