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Tata Consultancy Services (TCS) - Analyst Meet Update - Dated - September 06, 2013




Axis Capital Limited


10 Sep 2013





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Key takeaways from TCS analyst meet:  FY14 to be better than FY13 (our estimate 17% growth in USD revenue) and growth to be front-ended (H1 stronger than H2)  Demand environment being driven by recovery in US (54% of revenue) coupled with increasing penetration in Europe (10% of revenue)  Broad-based growth across verticals with BFSI (43% of revenue) leading the pack. Telecom (10% of revenue) continues to be a cause of concern. Discretionary spend likely to drive growth in the Enterprise solution offering (15% of revenue). Other verticals continue to perform in line with management expectations What to expect in Q2  USD revenue: We maintain our revenue growth at ~5% QoQ in Q2 (cross currency impact of 100-150 bps)  Margin: We expect increase of 275-350 bps owing to INR depreciation. Excluding the impact of INR, margin to be flat QoQ (Q1FY14: 27%)  Forex: We expect a loss of Rs ~6-7 bn depending on INR rate at quarter-end Valuation Strong demand environment coupled with increasing penetration in Europe is likely to drive growth for TCS. Our FY14E/ FY15E EPS stands revised to Rs 91/ Rs 108 (earlier Rs 88/ Rs 101) as we incorporate our revised INR estimates of Rs 62/ Rs 64 (earlier Rs 60/ Rs 62) for FY14/ FY15. At CMP of Rs. 1,988, the stock trades at ~22x/ 18x FY14E/ FY15E respectively. Maintain HOLD with revised TP of Rs 2,166 (20x FY15 EPS) implying 9% upside from CMP. Regards, Priya Rohira (Executive Director – IT & Telecom) Institutional Equity Research Axis Capital Ltd. Tel.: + 91 22 4325 1104 Vishal Desai (AVP – IT) Institutional Equity Research Axis Capital Ltd. Tel.: + 91 22 4325 1119

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