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Global brokerages give thumbs up to TCS post Q1 results; should you invest?


Most of the global brokerages gave thumbs up to Tata Consultancy Services (TCS) post its stellar Q1 results.

The IT major posted Rs 7,340 crore consolidated net profit for the first quarter of fiscal 2018-19, registering 23.5 per cent annual and 6.3 per cent sequential growth.

Macquarie upgraded TCS shares to 'outperform' from 'neutral' with a target price of Rs 2,015.

"BFSI pain point is getting addressed. The outlook for the US BFSI space is significantly improving," it said. The global brokerage house raised its FY19-21E EPS for TCS by around 10-14 per cent.

Jefferies also turned its rating on TCS to 'buy' from 'hold' with a target price of Rs 2,140.

"The company showed strong performance in Q1. Management of the company also outlines better outlook for BFSI, with recovery even in North America. We raise growth and margin estimates for TCS and upgrade the stock," the brokerage house said.

In a regulatory filing to the BSE, the IT firm said consolidated revenue for the quarter (Q1) under review grew 15.8 per cent annually and 6.8 per cent quarterly to Rs 34,261 crore.

Under the International Financial Reporting Standard, net income grew 17.2 per cent year-on-year to $1.1 billion and revenue 10 per cent to $5.1 billion for the first quarter.

"Revenue from North America market grew highest in the last 12 quarters or three years by 7 per cent annually and 3.7 per cent quarterly on recovery from banking, financial services and insurance (BFSI) and retail," said TCS in a statement here.

Operating margins remained flat at 25 per cent as in the previous quarter (25.4 per cent).

"Digital business contributed 25 per cent to the overall revenue and grew a whopping 44.8 per cent YoY," it added.

The company added 2 new clients in $100 million billing rate and 13 clients in $5 million band sequentially.

CLSA maintained 'buy' on TCS with a target price of Rs 2,200. "Stellar first quarter performance beats on all metrics. US, BFSI and retail segment rebound during the quarter. Strong deal wins continued with total TCV of $4.9 billion and margins were also ahead despite wage hikes and large deal on-boarding. TCS lived up to its promise of growth recovery in BFSI," it said.

However, CITI maintained 'sell' on TCS with a target price of Rs 1,645.

Shares of the IT behemoth were trading 2.47 per cent up at Rs 1,923.40 in early trade, while the BSE Sensex was down 15 points, or 0.04 per cent, at 36,223.

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