Tata Consultancy Services (TCS) guided that FY15 revenue growth is trending ''in-line with its expectations''. Company maintained that organic revenue growth in FY15 would be better than FY14 (which is 16.2% USD revenue growth) and would remain front ended (1HFY15 stronger than 2HFY15).
TCS guided that growth would be uniformly spread across verticals for 2QFY15. However, Insurance vertical which was soft in 1QFY15 would continue to remain weak in 2QFY15. Smaller verticals (Media, Travel, Life sciences) which have grown at a higher pace in 1QFY15 would grow in-line with the company average in 2QFY15.
Commenting on the same, Madhu Babu, HDFC securities Institutional Equities, said, ''TCS delivered 5.5% QoQ USD revenue growth for 1QFY15. We expect USD revenue growth of 7.3% QoQ for 2QFY15. We expect TCS' earnings to grow at 14% CAGR. TCS' valuations continued to be way ahead of its peers owing to strong revenue growth and stable operating performance. TCS trades at 21.1x FY16 EPS which is a 30% premium to Infosys' valuations. We retain our TP of Rs 2,750/sh. Maintain Buy.''
Shashi Bhusan, Prabhudas Lilladher, said, ''The management indicated seasonal strength with no headwinds for the quarter and retained their outlook of a better FY15 momentum than FY14. Moreover, the commentary indicated confidence of delivering 8% QoQ growth in Q2FY15. Retain Buy.''
''Management commentary indicates more uniformly distributed organic growth, with BFS revenue growth picking up even as insurance remains soft. We think predictable growth and the ability to navigate margins will support TCS' premium vis-à-vis peers. An improvement in the demand scenario, traction in the Japan JV, and continued execution would be the key stock triggers, said, Rumit Dugar, Religare Institutional Research.
Ankita Somani, Marwadi Shares & Finance (MSFL), said, ''The management indicated that overall demand remains good and in line with its expectations, and FY2015E trajectory will be better than FY2014 with normal seasonality of a stronger 1H as compared to 2H. We expect TCS to outperform industry on revenue growth due to its superior market reach & excellent execution capabilities and expect to grow its USD revenues at a CAGR of 16.7% over FY2014-16E and EPS at a CAGR of 15.8% during this period. We believe TCS' premium multiples are deserved given consistency in performance and leadership in growth/profitability. We maintain our Hold rating on the stock with target price of Rs 2,680 and would see any correction as an entry opportunity.''
