TCS - Q4FY13 Result Review - Nirmal Bang

- Tata Consultancy Services' (TCS) 4QFY13 revenue was at US$3,040mn, up 3.1% QoQ, slightly below our estimate of US$3,052mn.

- Volume growth stood at a healthy 4.4% QoQ, above our estimate of 3.8% QoQ growth, while constant currency (CC) pricing was flat; however, owing to unfavourable cross currency movement, reported pricing was down 1.2% QoQ.

- EBIT margin was in line, at 26.5%, down 73bps QoQ. However, adjusting for the impact of an Rs1.6bn onetime settlement with the US Securities and Exchange Commission (SEC), EBIT margin is up 25bps QoQ.

- Higher other income on forex gain of Rs1.2bn led net profit to rise 1.3% QoQ, marginally below expectations.

- The company's management expects FY14 to witness strong growth, with discretionary and non-discretionary spending robust among its client base.

- Given the decline in the stock price since our last report on TCS, we have upgraded our rating on it to Hold from Sell. We have revised our target price to Rs1,512 (from Rs1,480 earlier) owing to a marginal 2% rise in FY15E EPS.

Source : Equity Bulls

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