Accumulate Tata Consultancy Services; target of Rs 3380: Prabhudas Lilladher
Prabhudas Lilladher’s research report on Tata Consultancy Services
TCS delivered a strong set of perfomance for 4QFY18 with a beat on USD revenues and PAT. Revenues at USD4972mn were up 3.9% QoQ and 11.6% YoY and above our estimates (PLe: USD4921mn). Constant currency growth for the stood at 2% and above our ests (Ple: 1.5%). EBIT margin for the quarter came at 25.4% up 20 bps QoQ and below our estimates ( PLe: 25.7%). PAT for the quarter came at Rs69bn which is 1% above our estimates led by higher other income.
Accenture trades at 21.5x one year forward P/E while TCS is trading at 21.6x one year forward EPS. Despite scope for margin downgrades in TCS, we believe free cash flow generation is commendable which are aiding premium P/E multiples. Retain Accumulate.
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