Arihant Capital recommended hold rating on Tata Consultancy Services
TCS has beaten all our estimates with the Q3FY21 earnings. Consolidated revenue stood at Rs 42,0150 Mn, registering +5.4% YoY/4.7% QoQ. Consolidated EBIT stood at Rs 11,1840 Mn, up by 12.1% YoY/6.4% QoQ. On the margins front, EBIT margin improved by 159bps YoY/42bps QoQ to 26.6%, due to strong growth across all verticals, and operational benefits from SBWS model allowed TCS to post the highest operating margin in the last five years, even after rolling out a salary increase this quarter. Consolidated PAT saw a rise of 7.2% YoY to Rs 8,7270 Mn vs 8,1430 Mn in Q3FY20.The company also announced of interim dividend of Rs 6 per equity share. Constant Currency revenue growth: +4.1% QoQ, +0.4% YoY.
Outlook
We value TCS at PE of 32x to its FY22E EPS of Rs 104, which yields a target price of Rs 3,337 per share. We maintain our rating at HOLD for TCS.
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