Hold Tata Consultancy Services; target of Rs 3150: Emkay Global Financial

Emkay Global Financial recommended hold rating on Tata Consultancy Services with a target price of Rs 3150 in its research report dated April 13, 2021.

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Emkay Global Financial’s report on Tata Consultancy Services

TCS reported strong revenue growth of 4.2% qoq/5.9% YoY in CC terms, broadly in line with estimates. Despite the integration of low-margin deals (Post Bank and Pramerica), EBITM expanded 20bps QoQ on the back of strong revenue growth and robust operating efficiencies. Revenue growth was broad based, led by BFSI (7% CC QoQ), Retail & CPG (4%), Manufacturing (3.9%), Life Science & Healthcare (3.8%), Technology & Services (2.8%) and Communication and Media (1.8%). All geographies posted sequential growth.

Outlook

We largely retain our EPS estimates for FY22/23 (<1% change) after incorporating FY21 performance. TCS is well poised to benefit from strong demand, acceleration in cloud adoptions and digital transformation opportunities; however, the current valuation largely captures those factors. Retain Hold with a TP of Rs3,150.

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