Key Business segments showed accelerated growth; Strong client addition and higher distribution reduces dependency

TCS delivered solid constant currency (cc) revenue growth of 12.7% yoy (+2.4% qoq) in Q4 FY19 while the USD Revenue increased 8.5% yoy to USD 5,397 mn (+2.8% qoq) in line with our expectations. In Rupee terms, top line increased 1.8% qoq to INR 38,010 Cr. (+18.5% yoy). Operating margin of 25.1% in Q4 FY19 was down 52 bps qoq (down 31 bps yoy) impacted by slightly higher direct cost as % of revenue....

alluded at continuing of growth momentum in FY2020E, despite witnessing macro challenges in the environment. FY2019 was a strong broadbased growth year, driven by strong mega deal wins in FY2018. Stepping into FY2020E, management has stated at strong TCV wins in FY2019 ($22 billion), which give comfort on the growth trajectory. However, management has resented from giving any growth statement...

Deal TCV enhances revenue visibility for FY20E Banking & financial services continued to have momentum in Europe besides a few banks facing company specific issues. Sub-segments such as softness in capital markets can keep vertical growth in check. Commentary on demand in retail & CPG vertical was positive from a medium term perspective. The key positive was continued trajectory in order win TCV, growth of 5% QoQ at $6.2 billion ($21.9 billion in FY19). This implies book to bill ratio of 1.15x indicating better revenue visibility for FY20E. Hence,...

In-line 4QFY19: FY20 Growth And Margin Picture Not Yet Settled TCS' 4QFY19 performance was broadly in line with a positive surprise coming from the BFSI vertical, which after nine quarters, delivered double-digit (DD) growth. This was out of line with commentary given by TCS a month ago (see our note here). TCS hopes to sustain its DD constant currency (CC) revenue growth shown in FY19 going into FY20 and also deliver EBIT margin close to its aspirational target of 26%-28%. TCS emphasised the strong 4Q exit growth rate along with its broad nature as reasons for its hope. We believe only a 3% plus growth (QoQ) in each of 1Q and 2Q of FY20 would help settle the issue. The reason we question DD growth sustenance in FY20 is because FY19 did not witness large deals like...

We largely maintain our FY20E revenue (in US$). We cut our EBIT margin forecast to 25.2% vs. 26.4% and also cut our EPS forecast by 4.3%. We introduce FY21 financials and forecast revenue (US$)/EPS CAGR of 11%/9.9% over FY19-21E. We maintain ACCUMULATE with new TP of Rs2,228 (vs. Rs2,084 earlier) based on 22x FY21E. Key Highlights and Investment Rationale Q4FY19 see strong revenue growth of 2.4%/12.7% QoQ/YoY in CC Both QoQ CC growth and US$ growth of 2.8% was in-line with our forecast. Life Sciences & Healthcare (7.7% of revenue; +18.2% YoY in CC) and Regional markets &...

Sequentially TCS registered a 2% rise in consolidated sales to Rs 38010 crore for the quarter ended March 2019. OPM fell 50 basis points to 26.5% which saw OP stagnant at Rs 10074 crore. Margin was down 50 bps qoq on a reported basis, but remained largely in line, adjusting for a...

TCS delivered strong Mar'19 quarter performance with 2.4% QoQ CC growth, 25.1% EBIT margins and US$6.2bn worth deal wins. BFSI growth returned to double digit trajectory and marked its strongest performance in 11 quarters. Digital revenues at US$6.7bn run rate increased by 46% YoY. TCS remains our preferred pick amongst IT large-caps due to its (1) systematic and timely investment in digital capabilities, (2) growth visibility buoyed by robust...

TCS' growth and scale leadership in digital (USD 6.7bn annualized) are key differentiators. Continuity in strong deal wins, broad-based growth across verticals (esp. core) and geographies are driving double-digit growth. Margin/attrition differential vs. peerset reflects superior execution. Payout policy (80-100% of FCF), 90% FCF/PAT, ~4% FCF yield and 11/10% USD rev/EPS CAGR over FY19-21E support valuations (currently at 20x FY21E). We maintain BUY on TCS following an inline 4QFY19. Our TP is Rs 2,410 implying 24x FY21E EPS, with ~1% change in est. TCS is our top large cap IT pick.

13 April 2019 TCS ended FY19 with full-year constant currency (CC) revenue growth of 11.4% YoY, EBIT margin of 25.6% (+80bp YoY) and net income growth of 22.5% YoY. In FY19, TCS paid out 93% of its free cash flows to shareholders via dividends/buybacks. For 4QFY19, revenue in CC grew 12.7% YoY (in line), EBIT margin shrank 50bp QoQ to 25.1% (in line after adj. for 60bp one-off) and net income at INR81.3b grew 17.7% YoY a 3.6% beat due to INR3.4b forex gains. TCS signed USD6.2b worth of deals in total contract value (TCS) in 4Q, making it the strongest quarter in FY19 on that front.

expectations of 2.2%. EBIT margins, however, was 25.1%, down 50bps qoq vs. our expectation of 25.6%, but in line if adjusted for one-time charges toward electoral trust. Robust commentary driven by client optimism, evident from strong TCV signings of US$6.2bn up 5% qoq indicates continued business traction for TCS in FY20E. The...

View: Strong revenue growth outlook despite macro-economic concerns The management is confident of strong growth in FY20 despite macroeconomic challenges in the environment. The company signed TCV of USD 6.3bn during the quarter and TCV of USD 21.9bn for FY19 which gives us comfort for the growth trajectory in FY20. We expect a USD revenue growth of 9%/10% in USD terms for FY20/FY21, which factors in healthy growth in the BFSI vertical. The company maintained its aspirational margin band of 26%-28% despite visa rejection and talent shortage; we expect TCS to deliver margin towards lower end of its guidance. We...

Hints At Momentum For Double-digit Growth In FY20, But BFSI Is Flatlining SELL We had a meeting with the management of Tata Consultancy Services (TCS) recently. We came away from the meeting a tad bit more positive on its FY20 revenue outlook. While it stated that the current momentum in most verticals would take TCS to double-digit growth in FY20, we still believe it may fall a tad shy off double digit. We understand that about 200bps-250bps of FY19 revenue growth came from major orders that it won in 2HFY18 connected with its insurance platform. We have not seen announcement of similar kind of deals so far in 4QFY19. We therefore expect growth in FY20 to be a tad slower than in FY19. Some of the other key takeaways from the meeting include the following: (1) After a...

While growth momentum remains intact for now, one needs to be cautious on the likelihood of the same sustaining through the course of CY19. Barring Automotives and Hi-tech, traction is sanguine in other segments of the business

Currency fluctuations weighed on dollar revenue growth TCS delivered muted performance in Q3FY19 with consolidated revenue growth of 0.7% QoQ in dollar terms due to cross-currency headwinds. However, constant currency (CC) revenue growth stood at 1.8% QoQ/12.1% YoY in an otherwise seasonally weak quarter. The CC growth YoY (the highest in 14 quarter) was driven by continued acceleration across key verticals and geographies. Vertically, the growth was powered by BFSI (8.6% YoY), retail (10.5%), Telecom (10.8%) and life-sciences (15.7%), while UK (25.1%) & Europe (18%) led growth geographically. Further sustained momentum in digital business (grew strongly...

Other income jumped 59% to Rs 1163 crore and interest cost fell 88% to Rs 16 crore. After providing for depreciation (up 2% to Rs 519 crore), PBT went up 3% to Rs 10711 crore. Provision for taxation grew 6% to Rs 2590 crore after which PAT grew 2% to Rs 8121 crore....

Tata Consultancy Services (TCS) the largest IT services exporter in India has witnessed strong demand in Q3FY19 across segments. Strong traction was also seen in digital space, digital space reported strong growth of 53% for Q3 FY19 on YoY basis.

Maintain BUY with TP of Rs 2,430, at 24x Dec-20E EPS, supported by leading organic growth within tier-1 IT and >60% RoIC, >4% FCF yield & >3.5% dividend yield. TCS posted acceleration in revenue (in-line) supported by strong digital traction (53% YoY) and continued revival in BFSI. However, margins were lower on increased hiring and higher sub-contracting expense (both indicative of buoyant demand). Rev came at USD 5,250mn, 1.8/12.1% QoQ/YoY CC with digital at 30.1% of rev (USD 6.3bn rev annualised).