Hold Tata Consultancy Services; target of Rs 3700: Emkay Global Financial

Emkay Global Financial recommended hold rating on Tata Consultancy Services with a target price of Rs 3700 in its research report dated October 09, 2021.

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var titStr=”;var editw=”; var typevar=”; var pparr= new Array(‘Monitoring your investments regularly is important.’,’Add your transaction details to monitor your stock`s performance.’,’You can also track your Transaction History and Capital Gains.’); var phead =’Why add to Portfolio?’; if(secglbVar ==1) { var stkdtxt=’this stock’; var fltxt=’ it ‘; typevar =’Stock ‘; if(lastRsrs.length>1){ stkdtxt=’these stocks’; typevar =’Stocks ‘;fltxt=’ them ‘; } } //var popretStr =lvPOPRHS(phead,pparr); //$ (‘#poprhsAdd’).html(popretStr); //$ (‘.btmbgnwr’).show(); var tickTxt =’‘; if(typparam1==1) { var modalContent = ‘Watchlist has been updated successfully.’; var modalStatus = ‘success’; //if error, use ‘error’ $ (‘.mc-modal-content’).text(modalContent); $ (‘.mc-modal-wrap’).css(‘display’,’flex’); $ (‘.mc-modal’).addClass(modalStatus); //var existsFlag=$ .inArray(‘added’,newappndStr[1]); //$ (‘#toptitleTXT’).html(tickTxt+typevar+’ to your watchlist’); //if(existsFlag == -1) //{ // if(lastRsrs.length > 1) // $ (‘#toptitleTXT’).html(tickTxt+typevar+’already exist in your watchlist’); 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Emkay Global Financial’s report on Tata Consultancy Services

TCS Q2 operating performance missed expectations, reporting lower-than-expected revenue and EBITM. Revenue grew 4.2%/15.5% QoQ/YoY in CC terms. EBITM expanded by ~10bps QoQ to 25.6% due to headwinds from supply-side inflation and currency. Revenue growth was broad-based and all verticals posted double-digit CC growth YoY. Growth was led by Manufacturing (21.7% CC YoY), Life Sciences & Healthcare (19%), Retail & CPG (18.4%), and BFSI (17%). All geographies, except for Asia Pacific, posted double-digit growth YoY. Strong and sustained demand environment, broad-based growth, healthy deal intake (USD15.7bn in H1), and traction in cloud, enterprise application services, analytics and IoT give management confidence of sustaining a robust revenue growth trajectory.

Outlook

We cut our FY22/23/24 EPS estimates by 1.2%/0.3%/0.3% after factoring in the Q2 performance miss. The operating performance miss for the second consecutive quarter and rich valuations will weigh on stock performance. Maintain Hold with a TP of Rs3,700 (28x Sep’23E EPS).

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