Dolat Capital is bullish on Tata Consultancy Services (TCS) and has recommended accumulate rating on the stock with a target of Rs 2770 in its July 17, 2014 research report.
"Post the earnings call we turn incrementally positive on TCS in view of its sustained confident stance on the business outlook supported by its confidence on its client's budgets, strong deal intake across the verticals/geos, deal win across traditional as well as digital/SMAC areas and also view on the discretionary demand. It also has a well-planned strategy in terms of geographic drive up in regions such as Japan (Mitsubishi deal), LATAM and Nordics which would ensure strong incremental revenue run rates. We maintain TCS as our preferred Pick among Tier I IT space and expect it to maintain its outperformance over peers in the near term given its strong deal pipeline and broad based performance factor with a Target price of `2770 valued at 22x of its FY16E earnings."
"TCS's delivered better than expected operating results with a topline growth of 5.5% driven by 5.7% volume growth at $3.7bn. Revenues were up by 4.8% in constant currency terms. Growth was strong across the verticals/service lines and Geographies and management expect sustained momentum across the board over next couple of quarters. TCS has indicated sustained traction driven by improved demand from the GRC (Governance, Risk and Compliance) and Digital in particular. It is confident to maintain strong momentum given its strong client intimacy, Order book, quality of engagement, its bouquet of offering in the digital space and ability to execute in terms of talent/domain strength. It believes 'digital re-imagination' would drive discretionary momentum as well as cushion against pricing challenges."
"The company is witnessing higher demand for its service delivery model and better/ faster closure on deals across the verticals and geographies. The financial performance has been rising high over and above peers at all parameter reflecting the delivery strength, lead in the fast growing Digital space, and focused client strategy along with disciplined marketing investments. We believe it to continue to remain best player among the Tier I space to leverage the improving demand outlook also its strong volume confidence of 16%+ would keep it immune of any risk on sharp INR appreciation to a large extent and thus we maintain TCS as our preferred Pick among Tier I IT players with a Target price of INR 2770 valued at 22x of its FY16E earnings," says Dolat Capital research report.
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