Buy Tata Consultancy Services Ltd : Margin expansion QoQ a positive surprise - ICICI Direct
![](https://portfolio.investmentguruindia.com/investmentguruimages/upload/post/2021/10/118e16d468e9cb061ff653d3544788d9.jpg)
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Buy Tata Consultancy Services Ltd For Target Rs.4530
Margin expansion QoQ a positive surprise
About the stock: Tata Consultancy Services (TCS) is one of the leading IT service providers with a presence in BFSI, communication, manufacturing, retail & hi tech.
* Consistent organic revenue growth and industry leading margins (>25%)
* Stable management, robust return ratios (>RoCE 40%) & payouts (~70%)
Q2FY22 Results: TCS reported Q2FY22 results.
* US$ revenues grew 2.9% QoQ to $6,333 million, 4% QoQ CC growth
* EBIT margins improved 10 bps QoQ to 25.6%
* The company’s deal pipeline continues to be healthy at US$7.6 billion
What should investors do?
TCS’ share price has grown by ~3.6x over the past five years (from ~| 1,077 in October 2016 to ~| 3,976 levels in October 2021).
* We continue to remain positive and retain our BUY rating on the stock
Target Price and Valuation: We value TCS at | 4,530 i.e. 34x P/E on FY23E EPS
Key triggers for future price performance:
* TCS is key beneficiary of multi-year growth (15-20%) in digital technologies
* Increase in outsourcing in Europe, vendor consolidation and deal pipeline leading to revenue CAGR of 15.9% over FY21-23E
* Industry leading margins to continue; expect margins to improve 190 bps over FY21-23E
* Double-digit return ratios, strong cash generation and healthy payout.
Alternate Stock Idea: Apart from TCS, in our IT coverage we also like Infosys.
* Improving revenue growth, narrowing margins with industry leader and healthy payout
* BUY with a target price of | 1,930.
To Read Complete Report & Disclaimer Click Here
https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
Above views are of the author and not of the website kindly read disclaimer
![](https://portfolio.investmentguruindia.com/uploads/news/insurance 123.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/Axis Securities Ltd.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/Wipro.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/2b1715f7e03b51b0ac9c014eb224fc1f.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/gdp22.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/Geojit Financial Services.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/Dollar retures 2.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/health22.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/Arvind Kapil, MD and CEO, Poonawalla Fincorp.jpg)
![](https://portfolio.investmentguruindia.com/uploads/news/stock8.jpg)
More News
![](https://portfolio.investmentguruindia.com/investmentguruimages/upload/post/2021/09/1af0c5cf99f874a73864cfaaf520e2a2.jpg)
Neutral Zee Entertainment Ltd : Weak recovery, viewership loss; margin guidance cut for seco...
![Buy Whirlpool of India Ltd : Revenue in line; commodity prices dent gross margin - Motilal Oswal](https://portfolio.investmentguruindia.com/investmentguruimages/upload/post/2021/09/bb7aa30960eff68bf29eac8956cd051c.jpg)
![High Conviction Idea: Crompton Greaves Consumer Electricals Ltd - Recommend Buy; All sides covered By Religare Broking](https://portfolio.investmentguruindia.com/investmentguruimages/upload/post/2021/03/e7f5202836c95b2b72e253f0f3a422a1.jpg)
![Sell Navin Fluorine International Ltd : Steady performance, superior valuation - ICICI Securities](https://portfolio.investmentguruindia.com/investmentguruimages/upload/post/2021/08/24943bdfa3c9148976380dd48757c042.jpg)