TCS - Q2FY14 Result Review - Angel Broking

For 2QFY2014, TCS reported yet another strong set of results with a well rounded growth across all industry verticals, service lines as well as geographies. The dollar revenue grew by 5.4% qoq to US$3,337mn. In constant currency (CC) terms, the revenue grew 6% qoq, aided by a robust volume growth of 7.3% qoq (best in the past nine consecutive quarters). Organically (excluding Alti acquisition), USD revenues grew by 4.2% qoq. In INR terms, the consolidated revenues came in at Rs. 20,977cr, up 16.6% qoq. TCS' EBITDA and EBIT margins jumped up by 300bp and 314bp qoq to 31.6% and 30.2% respectively, aided by sharp INR depreciation (~300bp qoq gain). In addition, strong improvement in utilization (including trainees), which stood at 75% (+251bp qoq) also aided the operating margins.

TCS closed eight large deals during 2QFY2014 - two in BFSI, two in telecom and one each in utilities, hi-tech, lifesciences and retail & CPG. Management sounded confident of growing higher than the industry. Management indicated that the company has a robust demand pipeline across markets and the company see a unique opportunity to strategically partner and participate with clients. TCS maintained its gross hiring target of 45,000-50,000 employees for FY2014 which is encouraging. In addition, the company added three new clients in US$100mn+ revenue bracket (two new clients added in 1QFY2014). We remain positive on TCS which has been a consistent performer and the operational exuberance from the company continues. We recommend an Accumulate rating on the stock with a target price of Rs. 2,500.

Source : Equity Bulls

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