Tata
Consultancy Services Ltd
Reco: ACCUMULATE
CMP: Rs 2523
Target Price: Rs 2620
Misses
expectations a tad, Are Chinks appearing in the Armour?
·
TCS
delivered a 3.5% QoQ US$ revenue growth in June’15 quarter , however did well on margins with EBIT margins at 26.3% . Net profits beat aided by higher other income
·
June’15
quarter marks the 4th quarter in a row when TCS missed street/investor
expectations with TCS blaming the miss on challenges in Latin America,
Japan
and segments like Energy. While there are some chinks appearing in
TCS’s armour after the well rounded performance through several
years, we believe that they are largely on account of the transitioning
demand environment for the offshore IT Services space as they brace up for
the ‘increasingly Digital’ demand
·
TCS
in our view is executing relatively better to competition and thereby
driving our positive stance. While TCS will correct in the near term, we
believe TCS’s premium valuation multiples will hold. We cut valuation
multiples one notch to 19x (V/s 20x earlier) and maintain ACCUMULATE, TP Rs
2,620 (v/s Rs 2,730 earlier)
NOTE : MARKET DEPENDS ON PROBABILITY SO DON'T TRADE WITHOUT STOP-LOSS
