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Q3FY21 Result Update - Tata Consultancy Services - ICICI Direct

Posted On: 2021-01-12 03:40:11 (Time Zone: Arizona, USA)


Tata Consultancy Services (TCS) reported a healthy set of Q3FY21 numbers that were above our estimates on all fronts. Growth happened across geographies and verticals. The QoQ growth in revenues was led by healthy demand in core transformation services and conversion from earlier deals. US$ revenues grew 5.1% QoQ to $5,702 million, above our estimate of 3.6% QoQ growth and $5,619 million estimate. EBIT margins expanded 42 bps QoQ to 26.6%, above our estimates of 25.1%. TCS has declared an interim dividend of Rs. 6 per share. The company aspires to register double digit revenue growth in FY22E.

Valuation & Outlook

Going forward, global digital technologies are expected to witness robust growth (~15-20% CAGR in the next five years) led by robust growth in cloud, customer experience and robust growth in cloud native technologies. Considering TCS's digital prowess coupled with market share gains via vendor consolidation, captive carve outs and increase in outsourcing we expect TCS to register robust growth in revenues in coming years. This, coupled with healthy margins and better capital allocation prompt us to be positive on the stock from long term perspective. Hence, we maintain our BUY rating on the stock with a revised target price of Rs. 3,600/share (PE of 29x on FY23E EPS) (from an earlier target price of Rs. 3,410).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_TCS_Q3FY21.pdf

Shares of TATA CONSULTANCY SERVICES LTD. was last trading in BSE at Rs.3175.05 as compared to the previous close of Rs. 3120.35. The total number of shares traded during the day was 253600 in over 18332 trades.

The stock hit an intraday high of Rs. 3224 and intraday low of 3147.45. The net turnover during the day was Rs. 804977931.


Source: Equity Bulls

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