TCS hits six-month high; regains Rs 8 trillion market-cap mark

Tata Consultancy Services (TCS) hit a six-month high of Rs 2,149, up 2 per cent on Tuesday, extending its Monday’s 5 per cent rally on the BSE, after the company reported better than expected 2.4 per cent growth in constant currency (CC) revenue in the March 2018 quarter of financial year 2018 - 19 (Q4FY19).
The stock of IT major hit its highest level since October 4, 2018 on the BSE. Boosted by 7 per cent rally in stock post March quarter results, the market valuation of TCS regained the Rs 8 trillion-mark today to reach Rs 8.04 trillion at 12:50 pm, BSE data shows.

GIven the last two day's rally, TCS is now just 6 per cent away from its all-time high price of Rs 2,273 hit on October 1, 2018. The Tata Group company had commanded a market capitalisation of Rs 8.46 trillion then.

Strong results

Most analysts have maintained a ‘buy’ rating on TCS post its Q4FY19 numbers on expectation of double-digit growth in FY20 on improved deal wins, stronger exit rate, broad-based growth, robust pipeline and stable pricing environment.

“TCS’ strong TCV wins, improving YoY growth in BFSI, all-round vertical growth, rising digital revenue and healthy 4Q exit rate drive confidence on underlying momentum, and we expect the IT major to comfortably post double-digit revenue growth in FY20E (>11 per cent),” analyst at Reliance Securities said in a result update note.

The brokerage firm said it has encouraged with margin management in a challenging environment. High payouts to shareholders in the form of buybacks, along with good visibility will ensure the stock remains at elevated valuations, it added with target price of Rs 2,300 on the stock.

"We upgrade TCS to Neutral and prefer TCS over Infosys, as we are more comfortable on growth given: 1) strong exit growth of 12.7% in 4Q; 2) broad-based growth across segments, with ~7 of 8 verticals close to or higher than double digits in 4Q and continued traction in developed markets led by the European Union; and 3) strong deal wins of $22 billion in FY19. This positions TCS well for growth for FY20F, in our view; we expect ~8.8% CC growth," Rishit Parikh, an analyst with Nomura wrote in a post results note.

Analysts at Elara capital expect growth to accelerate in FY20, given deal wins of $6.2 billion, up from $5.9 billion in Q3FY19, and net hiring of 29,287 over FY19 vs 7,775 in FY18 despite subcontracting cost increase of 16.7 per cent YoY in US dollar terms over FY19. The brokerage firm has ‘buy’ rating on the stock with target price of Rs 2,410.