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Wednesday, 11 July 2018 12:24

Tata Consultancy Services shares hits record high on stellar Q1 results; should you buy?

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India’s most valued firm Tata Consultancy Services’ shares surged by 3.13% to hit a fresh 52-week high of Rs 1,935.90 on the BSE on Wednesday after posting stellar quarterly results.

Backed by robust Banking, Financial Services and Insurance (BFSI) growth and strong digital revenues, the IT bellwether on Monday reported a net profit at Rs 7,340 crore for the first quarter ended June, implying a 23.5% on-year jump. The stock had hit an all-time high of Rs 3,674 on the BSE on May 25, 2018.

As the shares of TCS rallied on upbeat earnings, here’s how top brokerages rate the stock:

HDFC Securities: HDFC Securities has upgraded its stance from ‘Neutral’ earlier to ‘Buy’ with a target price of Rs 2,130. “Our optimism has admittedly trailed TCS’ recent performance. Our (belated) upgrade derives from confidence on TCS’ growth trajectory, supported by (1) Scale and growth dominance of Digital business (25% of rev and 45.5% YoY), (2) Growth visibility (deal wins), (3) Strong recovery and outlook in BFSI vertical (across geos) and NorthAm geography and (4) Continuity in efficient capital allocation (80 to 100% of FCF as payout),” HDFC Securities said in a note.

Sharekhan: Sharekhan recommended a ‘Buy’ on TCS stock. “TCS Q1 earnings beats profit estimates,” it said in a note. “We recommend a Buy @ Tgt 2,200.00 and LTP (last traded price) 1939.50 (10-Jul-2018).”

Motilal Oswal Securities: The domestic research and brokerage firm has maintained its ‘neutral’ stance on TCS stock with a target price of Rs 1,950. “We expect TCS to clock 10/19% revenue/earnings CAGRover FY18-20. The EPS CAGR in part is led by normalization that follows flattish EPS in FY18. Recent deal wins and a recovery in both BFS and Retail lend confidence in an acceleration of growth in FY19 to 10% in CC terms, from 6.6% in FY18,” Motilal Oswal Securities said in a report.

“However, we aren’t building a continual of this acceleration into FY20, and thus maintain our Neutral stance on the stock at20x FY20E earnings. Our price target is INR1,950 (4% upside),” it added.

Nomura: Revenue and margins were above estimate, with recovery in BFSI being a key positive, Reuters reported quoting Nomura analysts. The Reuters report said that Nomura finds valuations expensive at about 23x FY20 EPS and retains stock’s rating as ‘reduce’ and price target of 1,440 rupees.

Jefferies: According to a Reuters report, Jefferies raised y-o-y constant currency growth rates to 10-11.5% over FY 19-21 vs 8.5 pct-10 pct earlier and raised margin estimates to 9-13% for FY 19-21. Jefferies upgraded stock to ‘Buy’ from ‘Hold’ noting best growth prospects amongst Tier-1 IT firms, raises PT to 2,140 rupees from 1,600 rupees, the report added.

Last modified on Wednesday, 11 July 2018 12:26

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