Tata Consultancy Services - Brings Optimism Back

BSE Index Analysis, Securties , Standard Experts

....**** on basis of BSE index

Tata Consultancy Services :

BFSI Flat QoQ But Brings Optimism Back......

Reco : Buy   

Cmp : 1,059   

Target : 1,193

Volume growth ahead of peers:

TCS reported Q4 USD revenue growth of 2.5% QoQ, which was ahead of our estimate (1.5% QoQ). Volume growth of 3.3% QoQ was better than -1% and 3% QoQ reported by Infosys and HCL Tech respectively. EBIT margin at 28% was in line, while PAT beat our estimate on lower than expected taxes.

Management expects BFSI growth to return from Q1FY13:

BFSI revenue growth was flat QoQ in USD terms vs. the 4-5% QoQ decline reported by Infosys and HCL Tech. The company signed 3 large BFSI deals in Q4. Given that BFSI is a major vertical for TCS (42% of revenue), likely improvement in Q1FY13 and subsequent quarters could reduce concerns of a general slowdown in the segment.

Demand outlook:

TCS won 6 large deals (10 in Q3) in Q4 and signed 42 new clients. Management indicated largely stable IT spend environment going forward. Delays in closures/ramp-ups in certain deals witnessed in Q4 have eased. Infact, discretionary deals, especially from the US, have started to come back. While it may be early to call it a trend, fears of a sharp cut in discretionary spending for TCS are likely to get allayed. Campus hiring target of 43k was maintained (with overall gross addition target of 50k for FY13) with average 8% wage hike. 

suggest : Must Buy