Multibagger Tata Group Stock To Give Potential 21% Return in 1-year, Gets Buy Rating

ICICI Direct has given buy rating to the stock of Tata Consultancy Services (TCS) for a potential gain of 21% and the time frame in which the stock is expected to reach its specified target is 1 year. The current market capitalization of the stock is Rs 1,140,617 core at the time of writing the story (11:52 am) and the dividend yield is 1.38%. TCS has declared an interim dividend of 800% or Rs 8 per share on June 30, 2022 and the ex-dividend date is July 14, 2022.

1. TCS Stock Outlook

The current market price of the stock is Rs 3116 apiece and target price that ICICI Direct has given is Rs 3785 apiece. The potential gain is 21% The time period by when it will reach its specified target is 1 year. The 52-week high of the stock is Rs 4043 apiece and 52-week low is Rs 3023 apiece. The stock has given multibagger returns of 154% in 5 years.

2. TCS Q1FY23 Results

TCS reported weak margins in its latest Q1FY23 results. Constant Currency or CC growth of 3.5% QoQ, 15.5% YoY was better than expected. EBIT (earnings before interest and tax) margins declined approximately 185 bps QoQ to 23.1% for the quarter. The company's TCV (total contract value) was at US$8.2 billion (bn) at Q1FY23.

3. TCS key triggers for future price performance

New organisation structure, which is aimed at increasing customer stickiness is expected to enhance market share gains. Increase in outsourcing in Europe, vendor consolidation and deal pipeline leading to revenue CAGR of 12.2% over FY22-24E. According to ICICI Direct, "We expect margins to be under pressure till FY24, resulting in margin contraction of 30 bps in FY22-24E. Double-digit return ratios, strong cash generation and healthy payout."

4. TCS Valuation

According to ICICI Direct, "We value TCS at Rs 3,785 i.e. 29x P/E on FY24E EPS." TCS' share price has grown by approximately 2.8x over the past five years (from ~Rs 1,165 in July 2017 to ~Rs 3,265 levels in July 2022).

5. About TCS

Tata Consultancy Services (TCS) is one of the leading IT service providers with a presence in BFSI, communication, manufacturing, retail & hi tech. Consistent organic revenue growth and industry leading margins (>25%). Stable management, robust return ratios (>RoCE 40%) & payouts (~70%).

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.