Maintain 'Reduce' rating on TCS - TP Rs.1000 - Geojit BNP Paribas

USD revenue for 4QFY12 increased 2.4% qoq. However, EBIT margin declined 155 bps on adverse forex market conditions and higher SG&A (selling, general & administrative) expenses.

Volume was up 3.3% qoq but overall realization declined 1%, possibly due to weak product mix.

As far as FY13 is concerned, the management's comment is mildly positive.

USD revenue is expected to grow 14 - 15% in FY13. However, margins would be flat excluding currency gains. This implies that any changes in EPS estimates by the street would be driven by gains/ loss from currency fluctuations.

Company sees IT spending modestly picking up in FY13 and normal growth patterns would prevail. Planned wage hikes are also a positive signal.

For the medium term, margins would continue to be under pressure, but a cyclical recovery and currency benefits may offset the margin pressure to some extent.

Company has 42% exposure in banking & financial services industry (BFSI), where growth is flattish. This remains another concern.

Source : Equity Bulls

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