Tata Consultancy Services Ltd. share price target

Q2FY18 revenue was in line (~USD 4.7 bn, up ~3% QoQ in USD terms) led by strong volume growth 3.2% (Q1FY18: 3.5%). Growth was driven by Life Sciences & Healthcare, Energy and Utilities and Travel & Hospitality. Also, Digital (~20% share) grew 6% QoQ.

Sequentially TCS registered 3% rise in consolidated sales to Rs 30541 crore for the quarter ended September 2017. OPM improved 170 basis points from 25.1% to 26.7% which saw OP rise 10% to Rs 8164 crore. OPM improved by 170 basis points, driven by 50 bps gain on account of favourable Forex and 120 bps savings in operating cost and SG&A; efficiencies. Other income fell 15% to Rs 819 crore and interest cost fell 74% to Rs 7 crore. After providing for depreciation (up 1% to Rs 504 crore), PBT grew 8% to Rs 8472 crore. Provision for taxation grew 6% to Rs 2012 crore after which PAT grew 9% to Rs 6460 crore....

Maintain NEUTRAL with a TP of Rs 2,570, 17x Sep-19E EPS. TCS uninspiring growth rate (+1.7% QoQ CC) continues to be volume-led (+3.2%), with a high impact of cross-currency on revenue (+1.5% QoQ) and margin (+50bps). Core geography performance was sub-par, impacted by BFSI and Retail & CPG verticals within the space. However, Digital (19.7% of rev) continues to trend strong, contributing 45% to incremental seq. growth. Growth in Legacy provided a respite with 2.2% QoQ, as compared to 0.4/0.7% CQGR in the previous 4/8-quarters.

Tata Consultancy Services (TCS) has delivered an encouraging performance in 2QFY18 with its USD revenue growing by 3.2% QoQ. While volume growth came in at 3.2% QoQ, CC pricing remained flat. Aided by operational efficiency and decent growth in revenue, its EBIT margin rose by 171bps QoQ (exceeding our estimate by 38bps), which led to 8.4% QoQ growth in PAT to Rs64.5bn (in-line with our estimate). From vertical perspective, the key BFSI vertical grew by 3.5% QoQ (marginally above company average), while Manufacturing and Communication & Media grew by 3.2% QoQ each, Technology & Services by 5.8% QoQ, Life Sciences & Healthcare by 4.7% QoQ, Travel &...

TCS expects the worst to be over for Retail & CPG vertical (11.9% of revenue). As regards BFSI vertical (33% of revenue), Insurance is expected to pick-up in H2FY18 and BFS in Europe would continue to grow. However, BFS in the US remains uncertain and TCS expects clarity by end-Q3FY18 as regards CY18 IT spends. We largely maintain our forecast of revenue (US$)/EPS CAGR of 8.7%/7.4% over FY17-19E. We maintain HOLD and TP of Rs2,462 based on PER of 16x FY19E. Key Highlights and Investment Rationale Q2FY18 revenue growth of 1.7% QoQ in CC and 3.3% QoQ in US$...

US$ revenues grew 3.2% QoQ to $4,739 million, in line with our 3.2% QoQ growth and $4,739 million estimate. Constant currency revenues grew 1.7% QoQ led by volume growth (3.2% QoQ) Rupee revenues grew 3.2% QoQ to | 30,541 crore, marginally ahead of our 2.9% growth estimate of | 30,453 crore At 25.1%, EBIT margins expanded 170 bps and were above our 130 bps expansion and 24.6% estimate mainly on account of better-thanexpected revenue growth and lower SG&A; (down 1.9% QoQ) PAT of | 6,446 crore was ahead of our | 6,267 crore estimate led by a...

...but impressive execution on margins: EBIT margin expansion of 170bp QoQ (est. of +80bp) to 25.1% was a positive surprise. The expansion in margin was contributed by multiple line items across COGS and SGA, and not by any single driver. Execution was particularly impressive, considering the drop in realization and the lack of growth support. However, the very factors will also test the sustainability of this upward trajectory toward the aspired range of 26-28%. Addition to client buckets reflects prowess: TCS saw healthy client additions across its revenue buckets (USD1m+ to USD100m+), marking its ability to...

Q1FY18 revenue was in line (~USD 4.6 bn, up 2% QoQ in cc terms) led by 3.5% volume growth. Except BFSI, Retail and Regional, all other verticals (37% share) grew >3.5% QoQ. BFSI and Retail (45% share) grew ~2% QoQ. Digital (~19% share; ~USD 3.5 bn annualized revenue) grew 7.6% QoQ. EBIT margin (INR ..

ff JSW Energy's recent acquisition of 1,391MW hydel capacity led to total 4,531MW generation capacity from 3,140MW that aided good revenue performance but reported PAT continue to decline...