Views on TCS 2QFY2016 Results: Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research - IT, Angel Broking) on TCS 2QFY2016 Results:

"TCS, posted results below expectation on sales front and net profit, while the EBIT margins remained in line with expectations. On sales front, the company posted a 3.0% sequential growth in USD revenues to US$4,156mn V/s US$4,177mn expected. On Constant currency (CC), the company posted a 3.9% qoq rise in sales. In rupee terms, revenues came in at INR 27,165cr V/s INR 27,244cr expected, up 5.8% qoq.

In terms of geography, US grew by 3.1% qoq CC growth; Latin America grew by 6.2% qoq CC growth. In Europe the UK region grew by 4.6% qoq CC growth and Continental Europe grew by 2.0% qoq CC growth. India, grew by 7.8% qoq CC growth, Asia Pacific grew by 4.1% qoq CC growth, while MEA grew by 12.9% qoq CC growth.

In terms of domains, the key outperforming domains were Assurance services, which posted a qoq 6.1% CC growth, while Asset leveraged Solutions, posted a 32.8% qoq CC growth. Other key domains like Application development & Maintenance 3.1% qoq CC growth, while Enterprises solutions grew by 3.4% qoq CC growth.

EBIT margins came in at 27.1% V/s 27.2% expected and 26.3% in 1QFY2016, a qoq expansion of ~78bps, mainly lead by currency depreciation (60bps). Consequently, PAT came in at INR 6,093cr V/s INR 6,213cr expected, a rise of 6.1% qoq.

On the operating front, the utilization rate came in at 86.0% (ex- trainees) and 82.3% (inl. Trainees), while the attrition rate came in at 16.2%. In terms of the client wins, company added 13 wins, adding 3 clients in the US$100mn and 6 clients in the US $10mn. This along with the strong employee net additions during the quarter of 10,685 and order book which company has mentioned is 30% higher than its best book ever, indicates and bodes well for company's performance going forward. We maintain our BUY rating on the stock with a target price of INR 3,168."

TCS (CMP: INR 2,597 / TP: INR 3,168 /Upside: 21.9%)

Shares of TATA CONSULTANCY SERVICES LTD. was last trading in BSE at Rs.2597.4 as compared to the previous close of Rs. 2592.4. The total number of shares traded during the day was 121981 in over 8946 trades.

The stock hit an intraday high of Rs. 2612.45 and intraday low of 2568.05. The net turnover during the day was Rs. 315799928.

Source : Equity Bulls

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