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Research
TCS - Q3FY14 Result Update - Microsec
Posted On : 2014-01-19 20:55:45( TIMEZONE : IST )
Tata Consultancy Services Ltd (TCS) announced its Q3 FY2014 results on 16 January 2014. While the company's top line came in line with both our as well as Bloomberg consensus estimates, its bottom line beat expectations.
While TCS' top line increased 1.5% sequentially to Rs. 21,294 Crores, its bottom line jumped 15.1% q-o-q to Rs. 5,333.4 Crores in Q3 FY2014. Led by 1.8% increase in volumes and 74 basis points (bps) improvement in realizations, the company reported 3.0% sequential expansion in its $ revenues to $3.44 Bn. This, after adjusting to currency translated into 1.5% sequential enhancement in Rs. top line. Amongst the regions, Latin America and Continental Europe remained the key contributors to the growth while MEA reported healthy growth on a low base. Within the business segments, Life Sciences & Healthcare, Manufacturing, and Telecom stood out. Furthermore, the company reported improvement in utilization rate, which improved to 84.3%, ex-trainees, in Q3 FY2014 compared with 83.4%, a quarter earlier. This factor coupled with industry low attrition levels and higher other income, driven by foreign exchange gains, boosted TCS' bottom line 15.1% q-o-q to Rs. 5,333.4 Crores. Additionally, sighting the better year, CY2014, ahead, the company raised its hiring target for FY2014 further by 5,000 professionals to 55,000. Moreover, in line with its initiatives to reward shareholders, TCS announced dividend of Rs. 4 per share for the quarter.
As expected, TCS outperformed INFY again in Q3 FY2014. However, it posted a lower top line growth than HCL Tech. We expect the company to continue enjoying higher margins in the upcoming quarters as well, led by - its higher employee utilization, industry low attrition level, and improved operating efficiencies. Although, TCS is trading at premium valuations vis-Ã -vis its peer group, its operational performance justifies such valuations. With this and the company's consistent performance over a large base, we continue to remain bullish on the stock with a target price of Rs. 2,458 per share.
