This Tata Group Stock Has 20% Upside Feels Motilal Oswal

The recent news of resignation of Mr Rajesh Gopinathan from TCS as the managing director and CEO was sprung as a surprise. Motilal Oswal believes that this sudden event of CEO exit and his replacement will not deter the business growth, potentially sees upside of upto 20%.

It was expected that Rajesh would continue for the long term given his age (52 years). Moreover, while the Tata Group company's growth has trailed peers like Infosys recently, it has handled external pressures, including a transition to Digital delivery and the Covid impact relatively well despite its size.

After receiving the resignation, the board of the company nominated its president and BFSI business group head, Mr K Krithivasan (Krithi), as the CEO Designate from 16th Mar 23, and he will take over officially as MD and CEO in FY24 after the shareholders approval.

"Krithi has been handling oversees largest industry unit at the company (32% of FY22 revenues) and has experience across roles, including delivery, CRM, program management and sales, which should help TCS maintain its track record of seamless transition."as per the brokerage.

Motilal Oswal still continue to see bluechip company, TCS as the best play in the IT services space in the current environment, with a focus on cost optimization and vendor consolidation. "We expect a USD revenue CAGR of ~11% and an Rs earnings per share CAGR of ~16% over FY23-25. Our target price of Rs 3,810 implies 24x FY25E EPS, with a 20% upside potential. We have a BUY rating on the stock its track record of seamless transition."

The current market price of the IT stock is Rs 3176.05 per share, it is down by 0.27%, over previous day's closing price. The 52-week high is at Rs 3,835.50 per share and 5-week low is at Rs 2,926 per share. In one year the stock price has fallen by 12.39% but in three years it has grown by 87.04%.

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