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Motilal Oswal Recommends This IT Stock To Buy, For Steady Near Term Growth
Reputed brokerage firm Motilal Oswal has recommended investors to buy the stocks of TCS, with a target price of Rs. 4250. TCS has shown a healthy topline beat to assuage growth concern; with a strong growth outlook. They have announced a dividend of Rs. 7/share.
Target Price
The Current Market Price (CMP) of Tata Consultancy Services (TCS) is Rs. 1899. Motilal Oswal has estimated a Target Price for the stock at Rs. 2260. Hence this company is expected to give a 10% return, in 1 year.
| Stock Outlook | |
|---|---|
| Current Market Price (CMP) | Rs. 1899 |
| Target Price | Rs. 2260 |
| 1 year returns | 10.00% |
Company performance
TCS's sales were Rs. 1,642 b in FY 21, which is expected to grow to Rs. 1,919 b in FY 22. The company's EBIT margin stood at 25.9%, which is expected to grow to 25.4%. Additionally, the company's PAT stood at Rs. 335 b, which is expected to grow to Rs. 390 b. TCS reported 3QFY22 revenue of USD 6.52b, up 4.0% QoQ in constant currency (CC) - above the firm's estimate of 3.2% growth. In 3QFY22, TCS' revenue (CC) grew 4.0% QoQ, Rs. EBIT grew 9.4% YoY, and Rs. PAT rose 12.3% YoY. Their total cash and investments were Rs. 670 b at end of 3QFY22.
Comments by Motilal Oswal
Maintaining a buy rating, Motilal Oswal commented, "TCS's 3Q deal wins remained stable at USD7.6b, with no mega deal. We view the stability in deal wins in the absence of mega deals as positive. This also implies a higher annual contract value (ACV) that should support near-term growth." The firm also said, "IT Services has entered into a technology upcycle, with Cloud migration and Digital transformation-led deals coming into the market."However, TCS' net profit of Rs. 97.7b increased 1.5% QoQ, which was below the firm's estimate due to the miss on operating margin.
About the company
TCS operates as a full stakeholder to business, offering a consulting-led approach with an integrated portfolio of technology-led solutions that encompass the entire Enterprise value chain. The company runs on a global scale, with a diverse talent base of over 556,986 associates (including subsidiaries) representing 156 nationalities, across 46 countries as of December 31, 2021. Astra Zeneca, SBI, Microsoft Corporation, Ministry of External Affairs-India, Mother Dairy, SAP SE, Vedanta, etc. are some of TCS's clients.
(Also read: Motilal Oswal Initiates Buy Call For This Construction Stocks, With A Rs. 2260 Target Price)
Disclaimer
The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
