Hold Tata Consultancy Services; target of Rs 2005: ICICI Direct
ICICI Direct’s research report on Tata Consultancy Services
TCS reported a below par performance both in terms of revenue and margin. Weakness was on account of a slowdown in retail, capital market segment & European banks. Further, growth in digital also moderated at 25% YoY (compared to average growth of 42.5% in the last nine quarters). The key positives of the quarter were 5% QoQ (30.6% YoY) increase in deal TCV at US$ 6.4 billion, addition of three clients in US$ 100 million+ revenue bucket and a special dividend of Rs 40 per share.
Weaker than expected Q2FY20, feeble commentary for H2FY20E and fully priced valuations prompt us to main our HOLD recommendation on the stock. However, healthy dividend payout could restrict the downside. We value the stock at 21x FY21E EPS with a revised target price of Rs 2005.
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