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Tata Consultancy Services Ltd. (TCS) | In-line performance




IndiaNivesh Securities Pvt Ltd


17 Apr 2013





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Tata Consultancy Services Ltd. (TCS) | In-line performance | Q4FY13 Result Highlights: Tata Consultancy Services Ltd (TCS) Q4FY13 performance was largely in-line with our expectations. USD revenues grew by 3.1% qoq to US$3,040mn (INSPL est: US$3,037mn) led by volume (+4.4% qoq), partially offset by cross currency head winds [negative impact of Rs.2,820 mn]. Rupee revenue increased 2.2% qoq to Rs.164bn (INSPL est. Rs166bn). EBIT margin contracted ~94bps qoq to 26.3% due to U.S. lawsuit settlement (down 98 bps) and negative currency impact (68 bps), partially offset by improved productivity. Net profit grew by 1.9% qoq to Rs36.2bn (INSPL est: Rs36.3bn). Adj. net profit (ex forex) went down by 3.1% qoq to Rs35.1bn v/s Rs36.2 bn in Q3FY13. The company reported forex gain of Rs.1,055 mn as compared to forex loss of Rs.734mn Q3FY13. Management expect FY14 to be a better year relative to FY13 on all fronts. Valuations: At CMP of Rs. 1459, the stock is trading at 18.2x FY14e and 16.2x FY15e EPS estimate. We like the company’s quarterly performance on all fronts. Additionally, the robust FY14 commentary and strong hiring guidance (v/s peers Infosys & HCL Tech) indicates strong revenue visibility going-ahead. Further, confidence to close FY14 $-revenue growth ahead of Nasscom’s guidance looks positive. However, upside potential from current level looks limited. As a result, we maintain our HOLD rating with the target price of Rs.1566 (17.5x FY15) on TCS.

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