Tata Consultancy Services - Q1FY21 Result Update - ICICI Securities

Tata Consultancy Services (TCS) has strong digital (new age technology) expertise which has led to the company winning large deals over the years. Going forward, global digital technologies is expected to witness robust growth (CAGR of ~20% CAGR over next five years) mainly led by business going digital and increase in work from home scenario. TCS is expected to be a key beneficiary of this trend. In addition, TCS has over the years also built strong products and platforms that have enabled it to scale existing clients efficiently while also enabling it to win new clients. Further, TCS' Secure Borderless Workspace (SBW) delivery model and Machine First Delivery Model (MFDM) framework will provide unique differentiation for its services. This will enable it to grow its revenues above industry in coming years. This coupled with strong cash flow generation and dividend pay-out keeps us positive on the stock from a long-term perspective.

Valuation & Outlook

In the near term, revenues, margins are expected to be under pressure leading to a washout FY21E. However, TCS has the ability to bounce back as seen in the 2008 global financial crisis. Further, we believe there are long term drivers for the company in terms of market share gains, acceleration in digital technologies and ability to win large deals based on company's execution. Hence, we remain positive on the stock from a long-term perspective. However, the current valuation factors in most of the positives. Hence, we maintain HOLD on the stock with a revised target price of Rs. 2400.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_TCS_Q1FY21.pdf

Shares of TATA CONSULTANCY SERVICES LTD. was last trading in BSE at Rs.2221.65 as compared to the previous close of Rs. 2204.35. The total number of shares traded during the day was 259682 in over 14758 trades.

The stock hit an intraday high of Rs. 2249.15 and intraday low of 2177.25. The net turnover during the day was Rs. 574668146.

Source : Equity Bulls

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