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Target: ₹3,882
CMP: ₹3,124
Tata Consultancy Services is one of the well-diversified companies across geographies and verticals. Amongst the geographies and verticals, America and BFSI are the largest contributor to revenue with 55.5 per cent, and 31 per cent, respectively.
Going ahead, we believe TCS will continue to expand in America and Europe regions, gain large transformation deals and add more clients. Also, the growth will be driven by TCS unique solutions across verticals, cost effective product and platform offerings and focus on new technology such as automation, Artificial intelligence and block chain.
TCS Order book for FY22 stood at $34.6 billion (all-time high order book) and 9MFY23 came in at 24.1bn. The deal momentum has been strong and driven largely by factors such as demand for cloud migration, digital transformation and focus on innovation capabilities.
TCS attrition came in at 17.4 per cent in FY22 and it increased to 21. per cent in Q3FY23. Despite the increase, TCS has managed to maintain the lowest attrition rate in the industry.
We have assigned a PE multiple of 24x (which is an average PE in the last 10 years) on FY25EPS and have initiated the coverage on TCS with a Buy rating and a target price of ₹3,882.
Key risks: Growth can be impacted by a) Increase in attrition and b) High volatility in currencies as compared to rupee.
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