13 Jul Hold Tata Consultancy Services; target of Rs 3370: Axis Securities
hold
Axis Securities report on Tata Consultancy Services
In Q4FY23, Tata Consultancy Services Ltd (TCS) reported revenue of Rs 59,381 Cr, up only 0.4% on a QoQ basis (in rupee terms). While it posted better revenue growth of 12.6% on a YoY basis, it nonetheless was the lowest in the last 12 quarters. The company reported operating profits of Rs 13,755 Cr with operating margins at 23.2% (a decline of 130 Bps). This was on account of wage hikes, higher visa and other operating costs. Attrition levels did drop by 220bps but they stood at 17.8%, looming concerns over the company’s execution efficiency in the future. The management commentary on the verticals BFSI, Hi-tech Media, Life Sciences, and Retail was cautious. Furthermore, it expects the company to report moderate growth in the near term. On a brighter note, deal-wins for the quarter continued strong and remained high. Moreover, deal wins were spread across verticals and across geographies and stood at $10.2 Bn (BFSI TCV at $3 Bn, Retail TCV at $1.2 Bn). However, TCS expects technology spending to remain resilient and expects the secular tailwinds to drive healthy growth over the medium term to long term.
Outlook
We recommend a HOLD rating on the stock and assign a 23x P/E multiple to its FY25E earnings of Rs 144.5/share to arrive at a TP of Rs 3,370/share, implying an upside of 3% from the CMP.
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