'Accumulate' TCS; target price at Rs 3,530: IDBI Capital
Source: IRIS | 11 Jan, 2021, 01.13PM
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Rating: NAN / 5 stars. |
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TCS reported a second consecutive stellar performance in Q3FY21 with a beat across the board vs. our forecast. Revenue grew by 4.1% in CC (best QoQ growth in Q3 in 9 years) and EBIT margin saw a improvement of 40bps QoQ to 26.6% (a 20 quarter high). EPS of Rs 23.2 grew by +5.4%/+7.2% QoQ/YoY.
In Q3FY21, TCS has secured deals with TCV of USD 6.8 billion (excluding the Postbank Systems deal). TCS has maintained its positive outlook and is confident of achieving a double-digit YoY revenue growth in CC for FY22.
Commenting on the result review, IDBI Capital Markets & Securities said, "We factor Q3FY21 beat and increase our FY21/22/23E revenue (USD) by 1.3%/2.1%/2.4%, EBIT margin by 65bps/90bps/50bps to 25.8%/26.3%/26.6% and EPS by 2.4/4.3%/3.5%. We now forecast revenue/EPS CAGR of 11.1%/14.3% over FY21-23."
"Given this strong growth we increase our target PER to 30x (from 28x) and increase our TP to Rs 3,530 and now recommend ACCUMULATE," it said.
TCS attributed the excellent Q3FY21 performance to strong demand for core transformation solutions, market share gains and quick conversion of deals wins to revenue. TCS expects this to sustain and is confident of achieving a double-digit YoY revenue growth in CC for FY22. "We have factored revenue growth of 11.9% for FY22E and 10.2% for FY23E," the broking firm added. Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.
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