Why Brokerages Are Recommending To Buy TCS Shares?

Investment

oi-Sunil

By Sunil Fernandes

Published: Tuesday, July 14, 2015, 10:09 [IST]

Tata Consultancy Services (TCS) kicked-off the Q1 earnings season with a tepid set of results. The Q1 results of TCS were largely in line with estimates, though the stock has dipped in the past few trading sessions. Here is Why brokerages are still bullish on TCS.

Arihant Capital

Brokerage firm Arihant Capital recently recommended buying the TCS stock. "We believe TCS will improve its performance with consistent client wins and stabilizing global scenario. We are optimistic on company's transformation on digital platform. We have valued stock at P/E(x) of 20x to its FY17E earnings and have arrived at fair value of Rs 2,700 per share. We have ‘Hold' rating on the stock", says Arihant Capital Markets research report.

Emkay Global

Emkay Global is also bullish on TCS and has suggested buying the stock with a price target of Rs 2620.

"We continue to believe that TCS's relative premium to peers will hold as we expect TCS's positioning as a strategic outsourcing vendor to help it handle the transitioning demand environment for offshore IT Services players. While TCS will correct in trade in the near term, TCS along with HCL Tech are our relatively preferred picks in the Tier I space", says Emkay Global Financial Services research report.

Prabhudhas Lilladher

Brokerage firm Prabhudas Lilladher has also put a buy rating on the stock with a price target of Rs 2780.

Reasons for bullishness

Several other brokerages have recommended buying the stock after the Q1 results. There are a number of reasons for the same. One is that the management commentary has been positive. The company believes that it can surpass industry growth rates this year and this is much better than some peers. Secondly, the company is making rapid strides in digital and this is what clients may want in the future.

Also, many analysts believe there is unlikely to be too many cross currency headwinds in the next few quarters and if the rupee depreciates against the dollar it could be beneficial for TCS.

Leadership status, enhanced domestic inflows are among the factors that see which could help the share price of TCS.

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