Tata Consultancy Services - 2QFY2016 Result Update - Angel Broking

For 2QFY2016, TCS' results have come in slightly below our expectations on the sales and net profit fronts, while EBIT margins have come in in line with our expectations. The company posted a 3.0% sequential growth in USD revenues to US$4,156mn V/s an expected US$4,177mn. In constant currency (CC) terms, the company posted a 3.9% qoq rise in sales. In terms of geographies, the US grew by 3.1% qoq CC, Latin America grew by 6.2% qoq CC, India grew by 7.8% qoq CC, Asia Pacific grew by 4.1% qoq CC, while MEA grew by 12.9% qoq CC. EBIT margins came in at 27.1% (V/s 27.2% expected) V/s 26.3% in 1QFY2016, a qoq expansion of ~78bp, mainly led by currency depreciation (68bp). Consequently, the reported PAT came in at Rs. 6,055cr (V/s an expected Rs. 6,213cr), a rise of 6.1% qoq. We maintain our Buy rating on the stock with a target price of Rs. 3,165.

Quarterly highlights: TCS posted a 3.0% sequential growth in USD revenues to US$4,156mn V/s an expected US$4,177mn. In CC terms, the company posted a 3.9% qoq rise in sales. In terms of geographies, the US grew by 3.1% qoq CC, while Latin America grew by 6.2% qoq CC. In terms of domains, the key outperforming ones were Assurance Services, which posted a 6.1% qoq CC growth; while Asset Leveraged Solutions posted a 32.8% qoq CC growth. The EBIT margin came in at 27.1% (V/s an expected 27.2%) V/s 26.3% in 1QFY2016, a qoq expansion of ~78bp, mainly led by currency depreciation (68bp). Consequently, the PAT came in at Rs. 6,055cr (V/s Rs. 6,213cr expected), a rise of 6.1% qoq.

Outlook and valuation: The Management reiterated that it expects the company's growth in FY2016 to be higher than the NASSCOM growth estimate of 12-14% growth for the industry. Over FY2015-17E, we expect TCS' revenue to post a CAGR of 14.5% in USD terms and of 15.8% in INR terms.

Shares of TATA CONSULTANCY SERVICES LTD. was last trading in BSE at Rs.2526.7 as compared to the previous close of Rs. 2486.85. The total number of shares traded during the day was 61931 in over 4905 trades.

The stock hit an intraday high of Rs. 2529.8 and intraday low of 2492.5. The net turnover during the day was Rs. 155990831.

Source : Equity Bulls

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