TCS m-cap hits Rs 12 lakh crore after fastest Q3 growth in 9 years

TCS m-cap hits Rs 12 lakh crore after fastest Q3 growth in 9 years

NEW DELHI: Bullish bets on TCS jumped, with the stock hitting a market cap of Rs 12 lakh crore in Monday’s session following the IT firm’s upbeat December quarter results. Jefferies said it has a target of Rs 3,750 on the stock. Goldman Sachs finds it Rs 3,626-worthy. JP Morgan and Bernstein pegged the stock at Rs 3,400. CLSA and HSBC see the scrip at Rs 3,200.Nomura India isn’t too optimistic and has a target of Rs 3,070 on the stock, as it awaits better entry levels.

The stock rose 3.12 per cent to a record high of Rs 3,224 on BSE. With this, The IT major commanded a market cap of Rs 12.07 lakh crore over Rs 11,70,875 crore on Friday.

JP Morgan noted that December quarter growth was TCS’ fastest in the third quarter in nine years. It said that the up-cycle brought back consistency in TCS earnings, and a beat in an otherwise weak quarter. This brokerage has upgraded its revenue estimate on TCS by 1 per cent for FY21 and 2 per cent each for FY22 and Fy23.

Goldman Sachs said it has increased its FY21-23 earnings estimates by 4 per cent and target price by 7 per cent.

It said TCS will be one of the key beneficiaries of the current wave of IT outsourcing and cloud migration, given its scale of operations, wide set of client base and large pool of reskilled employees trained on various cloud platforms.

This brokerage said that Ebit margin expansion was the biggest positive surprise, given the wage hike during the quarter.

“We continue to believe that TCS is one company which can emerge stronger out of this crisis, bouncing back strongly in FY22. Valuations (at 26x FY23 PE) might appear expensive (relatively) – but we expect TCS to continue to command valuation premium to its peers, on the back of its strong diversified profile, superior return profile (ROE of 38 per cent), management stability and market leadership position,” Phillip Capital said while maintaining a target of Rs 3,470 on the stock.

Nomura said that the December quarter was impressive with an all-round beat on revenue growth of 4.1 per cent sequentially CC compared with the consensus estimate at 3.2 per cent. It said EBIT margins at 26.6 per cent was above the consensus estimate of 25.3 per cent.

It said the outlook for the IT firm is positive, led by its ability to participate in the transformation agenda at clients, given its portfolio of offerings and ability to stitch large complex arrangements. Besides, a 13 per cent YoY growth in deal wins of $6.8 billion and robust execution on cash conversion with CFO/ebitda of 98 per cent and historically-low attrition of 7.6 per cent, augurs well for TCS, Nomura said.

TCS on Friday said its profit rose 7.18 per cent YoY to Rs 8,701 crore in December quarter compared with Rs 8,118 crore in the corresponding quarter last year.

Revenue for the quarter rose 5.42 per cent YoY to Rs 42,015 crore compared with Rs 39,854 crore in the same quarter last year. The company said it was its strongest third quarter in nine years.

In dollar terms, the revenue was up 5.1 per cent. On a constant currency basis, revenue rose 4.7 per cent, the IT major said in a BSE filing.

Operating margin for the quarter came in at 26.6 per cent compared with 25 per cent in the same quarter last year. Net margin stood at 20.7 per cent.

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