TCS: The Street view

Reuters Updated - January 22, 2018 at 11:31 PM.

tcs

TCS delivered another soft quarter of growth adding to the worries of Indian IT sector after Infosys trimmed US dollar revenue growth guidance and HCL Technologies’ revenue warning.

Brokers worry the stock might give up its premium over rivals amid soft earnings and negative news flow in the sector.

Increased outsourcing of digital technology services by western companies helped TCS, India’s largest software services exporter, post a 14.5 per cent rise in quarterly net profit, meeting market expectations.

A summary of key points so far:

Citigroup has downgraded the stock to “sell’’ from “neutral’’ and cut the target price to Rs 2,430 from Rs 2,765. It says performance remains commendable at this size but expect slowing growth to put pressure on multiples. The bank’s concern on “profitable growth’’ for the sector remains. It adds that the sector is likely heading to a tougher budgeting cycle (given macro) and seasonal weakness.

Credit Suisse has maintained “outperform”’ but cut ‘the target to Rs 3,000 from Rs 3,100. It says that the management does not sound as concerned as Infosys did regarding H2, outside of the usual seasonality and indicated overall stable pricing trends.

Morgan Stanley has maintained “equalweight’’ on the stock. It says weak rupee and strong commentary could prevent any material EPS estimate cuts after disappointment in 2Q revenues. However, P/E is at a 12 pct premium to Infosys, which could narrow.

Published on October 14, 2015 03:55