STOCK IN FOCUS
* TCS’ 1QFY19 revenue, EBIT margin and net profit all came in above our estimates; revenue in CC terms rose 4.1% QoQ (our estimate 3.2%).
* On the margin front, EBIT margin declined just 36bps QoQ (103bps above our estimate), aided by currency and operational efficiency.
* From a vertical perspective, TCS’ key BFSI vertical witnessed 3.7% QoQ CC revenue growth (5% including platform wins), while Retail & CPG grew 3.6% QoQ.
* The IT major won US$4.9bn in TCV in 1QFY19, implying a book-tobill ratio of ~1x, in-line with historical trend.
* Digital hit 25% of total revenue (23.8% in 4QFY18). f We expect the IT major to clock double digit growth in FY19.
* High payouts (100% of FCF) in the form of share buybacks, plus improving business visibility will ensure the stock remains at elevated valuations.
* We have a BUY rating on TCS with a TP of Rs2,170.
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