Sharekhan's research report on Tata Consultancy Services
TCS’s resilient revenue profile is likely to see an uptick with the ramp-up of large deals from JLR, Nest, BSNL, and Aviva. Deal win TCV over 9MFY24 is robust at USD29.5 billion. EBIT margin improvement is expected to steadily continue in FY25 aided by revenue growth, automation, pyramid restructuring, optimisation of subcon costs, and increased utilisation. Opportunities arising from the SAP migration cycle, demand improvement in certain industry verticals including BFSI, and gradually receding headwinds should aid growth momentum. Gartner forecasts spending on IT services to grow 8.7% in 2024 from 5.8% growth in 2023.
Outlook
We maintain BUY on TCS with revised PT of Rs. 4,750 (the increase in PT reflects rollover of valuation multiple to FY26E EPS), as the company’s strong domain expertise, geographical presence, and ability to cross-sell make it well placed to grab opportunities across cost optimisation, digital transformation, and newer technology services. At CMP, the stock trades at 29.1/24.8x its FY25/26E EPS.
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