HDFC Securities recommends 'Buy' on Tata Consultancy Services (TCS). The stock broker has upgraded target price by 10% to Rs  2,750.

Commenting on the investment rationale, HDFC Securities said, "TCS has been a steady performer among Tier 1 IT vendors delivering consistent revenue growth while maintaining premium margins. Despite having the largest revenue base and headcount, TCS delivered the highest growth (16.2% in USD) for FY14. As per our view, TCS' revenues are likely to touch USD 30 billion by FY20E, which implies a 14.6% CAGR (FY14-FY20E).

Assuming TCS' headcount grows at 8.5% CAGR (FY14-FY20E), employee strength could reach 5 lakh by FY20 (vs. ~3 lakh as on FY14). Hence, TCS could replace IBM as the world's largest IT service provider on headcount by FY19.

TCS' Mcap at USD 79.2 billion is 46% higher than that of Accenture (USD 54 billion). TCS trades at 21x one year forward earnings, a premium of28% to Accenture (16x one year forward). TCS' EBIT margin (~27.7% for FY15E) is way ahead of Accenture (~15% for FY13). This has enabled TCS to widen its valuation gap with Accenture.

We expect TCS to deliver 17.3% USD revenue growth and 14% EPS CAGR (FY14-FY17E). Owing to rollover to FY17, we revise our target price upwards by 10% to Rs 2,750 a share (19x FY17 EPS)."

Shares of the company gained Rs 16.05, or 0.66%, to trade at Rs 2,448. The total volume of shares traded was 12,297 at the BSE (11.23 a.m., Friday).

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