JM Financial recommended hold rating on TCS with a target price of Rs 1720 in its research report dated July 10, 2018.
JM Financial's research report on TCS
TCS’ 1QFY19 result was marked by a strong margin management; reported USD revenue growth was broadly in-line. Management exuded confidence on recovery in the troubled US BFS vertical and indicated improved visibility on the medium-term outlook with a USD 4.9bn of pending order book in 1QFY19. This sets TCS well for a double-digit growth in FY19 though the high share of mega deals limits extrapolation over the longer term. We raise our FY19/FY20 EPS forecasts by 4% each on 1QFY19 margin beat + currency reset. The stock trades at 21X FY20F EPS, at 33% premium to INFO and 19% premium to its own 5-year median. Thus, while we recognize the recovery in growth trajectory and TCS’ aptitude in sole-sourcing large deals, the stock’s rich valuations restricts us from turning constructive.
Outlook
Maintain HOLD. Our price target moves to INR 1,720 (INR 1,640 earlier), also on roll-forward.
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